CEMP The Creation of European Management Practice
A Research Programme Supported by the European Union
Executive Committee: Professor Lars Engwall, Sweden (chair), Professor José Luis Alvarez, Spain, Professor Rolv Petter Amdam, Norway, Dr. Matthias Kipping, United Kingdom.
Executive Secretary: Dr. Cecilia Pahlberg, Department of Business Studies, Box 513, SE-751 20 Uppsala, Sweden telephone: +46-18-4711362; fax: +46-18-471 6810; e-mail: [email protected]
Home-page: http://www.fek.uu.se/cemp
CEMP REPORT No. 16
July 2001
Consultancies and the Creation of European Management Practice
by
Matthias Kipping University of Reading, UK
and Universitat Pompeu Fabra, Barcelona, Spain
TSER Contract SOE1-CT97-1072
- 2 -
Table of Contents 1 Introduction ......................................................................................................................... 4
1.1 Overview of Research Objectives and Results........................................................................ 4 1.1.1 The industry level .....................................................................................................................4 1.1.2 The organisational level ............................................................................................................7 1.1.3 The project level .....................................................................................................................10
1.2 Consultants and Organizational Change: A Theoretical Framework .................................... 12 1.2.1 The existing literature .............................................................................................................12 1.2.2 An integrative framework (Hallgeir Gammelsaeter and Matthias Kipping) ...........................15
1.3 Focus, Methodology and Structure of the Report.................................................................. 20 2 Surveys of Management Innovations in Europe ............................................................... 22
2.1 Introduction (Celeste Amorim and Matthias Kipping).......................................................... 22 2.1.1 Management innovations as ‘new’ resources..........................................................................22 2.1.2 Characteristics of management innovations............................................................................24 2.1.3 Integrating external management knowledge .........................................................................25
2.2 Germany and Britain (Simone Strambach) ........................................................................... 28 2.2.1 Introduction.............................................................................................................................28 2.2.2 Sample and methodology........................................................................................................29 2.2.3 Number and types of organisational innovations implemented ..............................................30 2.3.4 Motives for organisational innovations...................................................................................32 2.2.5 Internal and external knowledge in organisational innovation processes ...............................34 2.2.6 Differences in organisational innovation patterns...................................................................37 2.2.7 The Influence of institutional contexts....................................................................................41 2.2.8 Conclusions and implications .................................................................................................44
2.3 Spain and Portugal (Celeste Amorim)................................................................................... 47 2.3.1 Introduction.............................................................................................................................47 2.3.2 Research Method and Data Collection....................................................................................48 2.3.3 Number of Innovations ...........................................................................................................49 2.3.4 Distribution over time .............................................................................................................51 2.3.5 Main characteristics of the innovators ....................................................................................52 2.3.6 External consultants ................................................................................................................54 2.3.7 Discussion and conclusion ......................................................................................................63
3 Case Studies....................................................................................................................... 69 3.1 The M-form in Norwegian Companies (Rolv Petter Amdam and Hallgeir Gammelsaeter) . 69
3.1.1 Context – the diffusion of the M-form....................................................................................69 3.1.2 The four cases .........................................................................................................................70
3.1.2.1 Norsk Hydro 70 3.1.2.2 Aker 73 3.1.2.3 Hafslund 74 3.1.2.4 Glamox 77
3.1.3 Discussion...............................................................................................................................79 3.1.4 Conclusions.............................................................................................................................83
3.2 Organizational change in Dutch banking (Doreen Arnoldus and Joost Dankers) ................. 85 3.2.1 Introduction.............................................................................................................................85 3.2.2 Background I: The Dutch banking sector, 1950-1990 ............................................................86 3.2.3 Background II: Management consulting in the Netherlands...................................................87 3.2.4 Dutch banks consuming consultancy services ........................................................................88
3.2.4.1 American consultancies at the commercial banks 88 3.2.4.2 Consultants at the co-operative Rabobank 93 3.2.4.3 In search for unity: consultants at the savings banks 99
3.2.5 Concluding remarks ..............................................................................................................105 3.3 Consultants in German consumer chemicals (Susanne Hilger)........................................... 107
3.3.1 Introduction...........................................................................................................................107 3.3.2 A brief history of Henkel ......................................................................................................108 3.3.3 Shifts in the attitude towards external consultants ................................................................109 3.3.4 The major SRI project, 1966-1969........................................................................................112
3.3.4.1 Phase I: Diagnostic 113
- 3 -
3.3.4.2 Phase II: Developing company strategy and planning 113 3.3.4.3 Phase III: Divisionalization 119 3.3.4.4 Phase IV: Ongoing support 122
3.3.5 Conclusion and outlook ........................................................................................................124 3.4 Human Resource Management in Italy (Cristina Crucini) .................................................. 127
3.4.1 Introduction...........................................................................................................................127 3.4.2 The background of the Italian work organisation .................................................................129 3.4.3 The development of Human Resources since the 1950s.......................................................132 3.4.4 Discussion and conclusions ..................................................................................................140
3.5 TQM in Spain and Portugal (Celeste Amorim)................................................................... 144 3.5.1 Introduction...........................................................................................................................144 3.5.2 Pressure for standardisation ..................................................................................................144 3.5.3 Methodology.........................................................................................................................146 3.5.4 Differences and similarities in TQM programmes................................................................147 3.5.5 Explanatory variables............................................................................................................151
3.5.5.1 Involvement of external actors 151 3.6.5.2 Interaction with externals 153 3.5.5.3 Knowledge / practice specificity 159 3.5.5.4 Firm specificity 160 3.5.5.5 Country specificity 163
3.5.6 Conclusion ............................................................................................................................164 3.6 TQM in Public Management in Britain and France (Denis Saint-Martin) .......................... 168
3.6.1 Introduction...........................................................................................................................168 3.6.2 Promoting consultancy: the State and the quality movement ...............................................170
3.6.2.1 Britain: Thatcherism and the New Enterprise Culture 171 3.6.2.2 France: From Dirigisme to Disengagement 173
3.6.3 Using consultancy: TQM ideas in the public sector..............................................................175 3.6.3 Britain : From Managerialism to Quality 177 3.6.3.2 France: The 1986 Policy on Quality and Innovation 180 3.6.4 Conclusion: the industrial policy origins of public sector reforms 183
4 Overall Conclusions ........................................................................................................ 186
5 References ....................................................................................................................... 189
- 4 -
1 Introduction The CEMP research project has proceeded in three steps to assess the contribution of the
different carriers of management knowledge (business education, management publications,
management consulting and multinationals) to the increasing similarity of management
practices in Europe (Engwall et al. 1997). The first step examined the extent to which each
carrier field has become dominated by a few actors, namely of American origin. The second
step looks inside a few selected examples for each of the carriers to see how they deal with
management knowledge and find out to what extent they standardise it across national
borders. In the final step, the project has focused on a limited number of management ideas
(multidivisional structure, quality management and shareholder value) to find out whether the
implementation of these ideas –with or without the help of the carriers– has actually
contributed to an increasing similarity or homogenisation of management practices across a
range of companies from different industries and countries.
Thus, research within the CEMP project in general and the consultancy part in particular has
proceeded on three different levels: (1) the field level, (2) the organisation level and (3) the
project level (cf. also Engwall and Kipping 2002). The first part of this Introduction will give
an overview of the research objectives of the different levels and summarizes the results
obtained so far for the first and the second levels as well their implications for the subsequent
research. It will also outline the major questions for the examination of the third level. The
second part of the Introduction will provide a brief review of the existing literature regarding
the international homogenisation of management practices and then sketch an integrative,
theoretical framework for the examination of the consultancy-client interaction and its
outcome in terms of organizational change. The third and final part of the Introduction gives
an overview of the methodology and sources employed in the research carried out for this step
of the CEMP project.
1.1 Overview of Research Objectives and Results
1.1.1 The industry level On the first level of analysis, we related to the traditional studies of industries, which in recent
years in organisation studies have been labelled as populations (e.g. Hannan and Carroll 1992)
or fields (e.g. Powell and DiMaggio 1991), and in the more economics oriented literature are
- 5 -
usually referred to as industries (e.g. Scherer 1970 and Porter 1980). In so doing we took an
interest in the development over time of consultancies as a group. Basic questions within the
framework of the CEMP project concerned the extent to which this field/industry in Europe
had become increasingly homogenized, i.e. whether a few, highly visible actors had come to
dominate the consultancy group and who these actors were.
Our research revealed that there are indeed strong trends for convergence and American
dominance across Europe (Kipping and Armbrüster 1999). Historically, consultancies of US
origin had played an important role in the diffusion of scientific management or Taylorism
during the first half of the century and the introduction of American models of corporate
strategy and organisation in the post-war period (Kogut and Parkinson 1993; Kipping 1996
and 1999). Our research has shown that many of the above mentioned strategy consultancies
continue to hold strong positions in the European markets at the turn of the millennium, with
McKinsey, AT Kearney, The Boston Consulting Group and others figuring among the top
firms in Europe as a whole and in most individual countries. But our work also shows that the
most striking phenomenon during the 1990s has been the rapid expansion of consultancy
service providers linked to large Anglo-American accountancies, widely known as the “Big
Five”. While the consultancy market as a whole has grown considerably during the last
decade of the twentieth century, most of them have grown much faster, taking market shares
away even from the successful and well-known strategy firms. In Europe, their expansion has
occurred mainly to the detriment of the larger national consultancies, which became
increasingly marginalized and in many instances were actually bought up by the more
successful service providers (cf. the country chapters in Kipping and Armbrüster 1999 for
details).
At the same time, however, it would be wrong to conclude from these developments that the
consultancy fields across Europe have become identical. Our research also shows that
considerable differences continue to persist. They concern for example the level of
development, measured in consultancy revenue relative to GDP where there is still a kind of
North-South divide within Europe. Another source of differences among the European
markets are the numerous small and medium-sized consultancies, which seem to have
flourished in many countries during the last decade, even though the absence of detailed and
reliable statistics makes it difficult to size this phenomenon (cf. also Keeble and Schwalbach
1995). Differences also concern the types of consultancy services, with certain markets
- 6 -
dominated by operational and IT services and other by advice on strategy and organisation
(cf. Kipping and Armbrüster 1999).
The opposite is true for small and medium sized consultancies. At first sight their national or
even local focus might seem to provide a barrier against a possible convergence of
management practices. But quite on the contrary, it is also feasible that that they actually
translate foreign knowledge into something that is easier to adopt and implement for locally
embedded small and medium-sized clients (Kipping et al. 1998/99). In addition, as suggested
by Engwall (1999), they also might play in favour of homogenisation because they are often
set up by former executives from large companies or by consultants who were working in
larger consulting firms. In other words these individuals end up reproducing what
characterises the knowledge and the approach of large corporations and consultancies, thus
acting as homogenising agents (cf. also Crucini and Kipping 2001).
Thus, there is also no doubt about continued diversity, namely with respect to small and
medium sized service providers, even if these might actually act as ‘hidden’ homogenisers.
At the same time, there is no doubt about the emergence of dominant actors, usually of US
origins, in the consultancy industry/field in Europe, both at a European level and in each of
the countries studied. But at this step of the research, an important question remained
concerning these dominant actors. The fact that the national offices of these large service
providers carry the same ‘brand’ name and belong to the same global consultancy firm does
not in itself constitute a sufficient proof for the fact that they disseminate identical models or
templates in each of these countries. Thus, as an earlier comparison of the French and
German consultancy markets has shown, the same consultancy does not provide necessarily
the same services in two different countries, even though they sometimes use the same
terminology. For example, what is called strategy consulting by McKinsey does not have the
same meaning in Germany and in France (Sauviat et al. 1994).
Hence, it should not be easily assumed that the knowledge coming from the centre of a
consultancy –in our case usually the United States– would automatically be adopted by the
peripheral offices of a consultancy. It is not even sure that such a centre actually exists. In
order to take advantage of economies of scales, many international consultancies today are
organised by so-called practice areas, which are co-ordinated from offices located in different
countries (Kipping and Scheybani 1994). The logical next step in our part of the CEMP
- 7 -
project was therefore to look inside the black box of consulting and to identify the ways in
which consultancies generate, codify and disseminate management knowledge internally and
to what extent this knowledge was similar among the different national offices.
1.1.2 The organisational level
Thus, our subsequent report (Kipping and Armbrüster 2000) examined the knowledge
management and dissemination inside consultancies, based on the study of selected consulting
organizations of different national origins and different sizes as well as an analysis of their
websites (since their intranets were not accessible for research). It tried to understand the
processes by which consultancies generate, codify and disseminate knowledge. The ability of
the consultancy organization to share information and knowledge internally obviously
constitutes an important source of competitive advantage. Some of this has been explored in
the literature, but many of the related questions had remained unexplored for example
regarding the incentives for consultants to share their knowledge with colleagues or the
knowledge management in smaller, nationally based consultancies. The current literature on
knowledge management focuses almost exclusively on the large consulting firms and also
does not try to identify possible differences between the knowledge management systems in
different countries.
A related even more important issue from the point of view of the CEMP research concerned
the national origin of the past practices, codified and transferred through internal knowledge
management systems. In many of the large consultancies, these are likely to come from
countries other than the ones in which they are applied (in many instances they probably
originate in the United States). The question here was to what extent, if at all, they are
adapted to the different national contexts in which these consultancies operate and, if this is
- 8 -
indeed the case, how this was done. The report therefore examined in particular the
differences between small and large consultancies and the influence of the national context.
Regarding the large and small consultancies, our research showed significant differences in
the ways they manage knowledge. Large consultancies, that is the traditional, large strategy
consultancies, the consulting arms of the big five accounting firms, and the IT-based service
providers have established systematic knowledge management systems which comprises
groupware software, document management, groups of specialization (called ‘competence
centres’ or similar), etc. The knowledge management of medium-sized and small domestic
consultancies is much more hands on. There is no software-supported knowledge
management and ‘knowledge’ is more centred on the around the consulting experience and
expertise of individuals, namely the most senior among them. Knowledge management in
consultancies, therefore, has two extreme ideal types: professionalised systems in the large,
international consulting firms and hands-on knowledge management, or no knowledge
management at all, in medium-sized and small domestic consultancies. The former rely on
different systems (increasingly IT-based) to extract the knowledge from individual
consultants, store it and disseminate it internally. For the latter, the costs of such a system are
clearly prohibitive. Their advantage is expertise, based in individuals. As a result, the scope
of the experience and expertise provided by the small consultancies remains limited – which
is why they had to develop some original forms of knowledge sharing.
Regarding the influence of nationality, our comparison between the knowledge management
in large firms in Sweden, Germany / Austria and Italy suggested that the differences between
them were fairly limited. This is quite understandable, since all of the firms studied in-depth
were global service providers of Anglo-American origin which can be expected to standardise
their knowledge management systems worldwide. We rather found some differences
depending on the type of firms, i.e. the traditional strategy consultancies, those originating
from the big five accounting firms or from computer software and solutions companies – with
the latter two relying more on IT-based solutions, which could be seen as function of their
larger size and their origins. With respect to small consultancies, nationality appeared to
matter more, in the sense that the service providers from different countries seem to have
developed different models to share and combine their knowledge and refer clients to each
other when they cannot offer a particular service. In Sweden, the incentive to refer clients
seems to be a kind of finders fee, i.e. the small consultancy or individual practitioner making
- 9 -
the referral expects some “cut” of the overall revenue. By contrast, knowledge sharing and
exchange in Germany seems largely based on central actors such as semi-public associations
and foundations. The small consultancy sector in Italy has been particularly vigorous, due to
a large numbers of spin-offs and many regionally or locally based small, often individual
service providers. As our interview- and questionnaire-based research has shown, many of
these small consultancies have developed informal networks to share knowledge and work
together for small and also large client organisations – usually based on frequent or even
permanent co-operation. In the Italian context, professional associations also play a certain
role, namely as a meeting place and forum for the exchange of experiences.
These results from the second step in the CEMP research had important implications for the
question whether consultancies contribute to an increasing similarity among organisation in
Europe. It seems clear that the large, international consultancies have very efficient ways to
spread knowledge throughout the world, both with their organisation and outside. And there
is no doubt that they have achieved a fairly high level of standardisation of their methods and
tools and the dissemination of ‘best practice’. All of this has without doubt contributed to an
increasing standardisation of discourse or ‘labels’ among consultants and managers – a fact
which has been recognised and highlighted by much of the earlier research. To what extent
and how this has shaped managerial practice, is the subject of this report which summarizes
the third and final step of the CEMP research, which focused on the role of consultants in the
implementation of selected management models.
However, research at the second step already suggested two notes of caution regarding the
homogenisation of management practices in Europe. One concerned the widely made
assumption that homogenisation means Americanisation. This is not self-evident, because the
consultancies’ show different degrees of centralisation and their ‘competence centres’ etc. are
not necessarily based in the United States. Also, in most of these firms, there are actually
more consultants based and working outside the US than in the US. Finally, there are
examples, such as ‘Time-based competition’ where the knowledge disseminated by a
consultancy of American origin did not originate in the US, but elsewhere (in this case Japan).
A second note of caution derives from the distinction of different types of knowledge
introduced in this report (cf. also Armbrüster and Kipping 2002). If the consultants focus
indeed on the type of knowledge which they actually develop themselves, namely change-
oriented knowledge, basically process management, they are more likely to reinforce the
- 10 -
specificity among their client organisations, by focusing on the internally available resources
and externalising existing knowledge. Only the research on the consultancy-client
interactions, some of it presented in this report, will be able to shed more light on this issue.
With respect to the possible homogenisation of management practices in Europe, our research
in the second step has highlighted an important, and rather unexpected role of small and
medium-sized consultancies. As the detailed studies of the Swedish and Italian cases clearly
show, in their discourse and selling strategy they highlight their distinctiveness and also the
fact that they provide solutions which are not the same for everyone, but adapted to the
particular situation. But, as our work on their knowledge management shows, the reality is
rather different. Because small consultancies rely on one or at best a few experts, the range of
solutions they can offer is actually fairly limited. As mentioned above, this can be
compensated partially by knowledge networks. Thus, what kind of knowledge they
disseminate depends to a large extent on the background, training, and experience of these
individuals, which needed to be elucidated by biographical research. We therefore decided to
study one particular consultant in more detail for this third and final stage of the research
project (see below).
Taking all of the above findings together, we had some indications about a possible
standardisation of management knowledge in Europe. They appeared somewhat less
pronounced than expected for the large, international consultancies (because they seem to
make efforts to adapt to the context in which they are operating); and a bit more pronounced
than expected for the locally based individual consultants or small consulting firms (because
of their background and their limited availability to develop original knowledge). However,
only the research analysing the actual interaction between consultancies and clients, i.e. how
consultancies manage to transfer management knowledge into client organisations, could shed
some more light on the question to whether and how consultants actually contribute to the
creation of European management practice and to what extent this practice is of ‘American’
origin.
1.1.3 The project level
- 11 -
To understand what is going on at the level of a consultancy project is of course the most
crucial step for assessing the impact of consultancies on management practice. There have
been a growing number of empirical studies examining consulting projects (e.g. Shapiro et al.
1993; Bloomfield and Danieli 1995; O’Shea and Madigan 1997; HBR 1997; Fincham 1999).
However, much of this literature has focussed on difficulties between consultants and their
clients. Two recent surveys also highlight a rather critical attitude of client organizations
towards consulting advice. In a survey among alumni of the London Business School, 68 per
cent of those who had used external advice believed that consultancy projects made a valuable
contribution to their business, but less than 30 per cent of them thought that consultants
provided good value for money (Ashford 1998: 267, 270). And in interviews with the CEOs
of the ten largest Swedish companies, Engwall and Eriksson (1999) obtained highly critical
answers about consultants, although all of the companies actually employed at least one,
usually several consultancies at the time of the interviews.
Historical case studies confirm this impression. One example is the introduction of scientific
management during the first decades of the twentieth century, which was often conducted
with the help of consultants. Several authors examining these cases have stressed the
resistance of workers, and occasionally foreman, against the implementation of these methods
(e.g. Littler 1982; Egolf 1985; Downs 1990). Similarly, company histories that contain
descriptions of consulting projects concerned with changes in strategy and structure also
highlight the rather critical reaction of the client organization towards external advice (e.g.
Church 1969; Pasold 1977; Holmes and Green 1986; Pugh 1988; Public Histoire 1991;
Cailluet 1995; Cailluet 2000; Kipping 2000). These studies point out that middle or even
senior management often considered the recommendations as too radical and opposed their
implementation. Frequently therefore, companies introduced consultancy suggestions only
partially or gradually.
However, while highlighting critical sometimes even hostile reactions towards the consulting
recommendations, none of these studies explicitly deals with the issue of whether or not these
consultancy interventions resulted in an increasing similarity between different organizations.
The only indications regarding the role of consultants in the homogenisation of management
practice can be found in some more theoretically oriented approaches in organization studies.
These will be examined briefly in the next part of the introduction, before presenting an
- 12 -
integrative theoretical framework, which attempts to build on these approaches, but also to
transcend them.
1.2 Consultants and Organizational Change: A Theoretical Framework
1.2.1 The existing literature
Probably the most clear and, by far the most influential, statement regarding the role of
consultants in the processes which lead organizations to adopt increasingly similar
management models or templates can be found in the seminal article by Powell and DiMaggio
(1983: 152), where they examine the different mechanisms (coercive, mimetic and normative)
leading to this isomorphism:
Large organizations choose from a relatively small set of major consulting firms,
which, like Johnny Appleseeds, spread a few organizational models throughout
the land. Such models are powerful because structural changes are observable,
whereas changes in policy and strategy are less easily noticed. With the advice of
a major consulting firm, a large metropolitan public television station switched
from a functional design to a multidivisional structure. The stations’ executives
were sceptical that the new structure was more efficient; in fact, some services
were now duplicated across divisions. But they were convinced that the new
design would carry a powerful message to the for-profit firms with whom the
station regularly dealt.
As the last part of this quote shows, in line with their more general argument about the
‘rationality’ within a given organizational field, according to Powell and DiMaggio the appeal
of consultants is not due to the efficiency of the solution they offer, but to the visibility and
legitimacy it provides the managers with respect o other, namely outside actors. More
recently, Kieser (2002; cf. also Ernst and Kieser 2002) has driven this logic to a certain
extreme. Combining a neo-institutional framework with the literature on (management)
fashions, he suggests that consultants exploit the need of managers to achieve control or at
least a semblance of control over their organizations in order to promote their services. He
relates this need for control on the one hand to the outside environment in which they operate
- 13 -
and, on the other hand, to the fundamental uncertainty of managers (cf. for the latter also
Abrahamson 1996).
By constantly launching new management fashions, consulting firms increase managers’ fear
of being out-of-date or being left behind their competitors. When hiring consultants, these
managers alleviate these fears and take a relatively low-risk strategy, because they are
following what is widely perceived as ‘best practice’. They cannot be wronged and even in
the case of failure, which is as difficult to measure as success, it is difficult to blame them
personally, since they only did what the consultants suggested and what everybody else in the
industry did. However, the relief remains temporary, since will soon launch a new
management fashion, often only a slightly modified version of the previous one, and the
whole cycle starts again. In this way, consultants have been able to make all but a few
exceptional managers dependent on their services or, as he puts it provocatively, ‘marionettes
on the strings of their fashions’. While Kieser does not explicitly address the question of a
possible standardisation of organizational practices following this fashion-driven process, it
seems fairly obvious that the consultant-dependent managers will tend to behave in a rather
similar way.
By contrast, the so-called business systems literature suggests that the national environment
provides a set of fairly rigid constraints for organizations (e.g. Lane 1989 and 1991; Whitley
1992; Whitley and Kristensen 1997; Whitley 1999). These constraints derive from what has
been called ‘background’ institutions (fairly general cultural values and norms) and from the,
more important ‘proximity’ institutions, which include the education system, the industrial
relations system, the role of banks and financial markets and the involvement of government.
Managers have to ensure that their organizations ‘fit’ into a given context in order to ensure
their survival. While organizations within one national context will therefore resemble each
other closely, they will differ significantly from those operating under a different set of
constraints. Homogenisation across national boundaries therefore only appears possible if the
above-mentioned institutions would become increasingly similar. Given that they are the
deeply rooted in cultural and social values and have evolved historically, such a development
seems unlikely – at least in the short run. Within these national business systems, there is
little room for consultants to operate as homogenizing agents. They only role they could play
would be to help organizations achieve a better ‘fit’ with their environment – but this is never
explicitly explored in any of the above-mentioned literature.
- 14 -
In his book on the spread of new management models in the United States and several
European countries, Guillén (1994) has offered an interesting modification of this approach,
which leaves somewhat more room for the operation of consultancies (and other carriers or
management knowledge). In general, he also highlights the importance of the national
institutional context for explaining patterns of adoption and rejection of new management
ideas. However, his framework is slightly different. He distinguishes between the ideological
and the more technical aspects of these management models and sustains that one can be
adopted with out the other. Thus, consultants can play a role in transfering ideas from one
business system to another -- either in the form of simple tools and techniques or as an
ideology, i.e. at a fairly high level of abstraction (cf. also Lillrank 1995). This distinction
between talk and action has a long tradition in social science research and organization studies
(cf. Sturdy and Fleming 2001). The debate about whether and how long managers can
actually maintain such a distinction is far from being resolved.
The so-called Scandinavian institutionalism seems to offer a certain answer to this question
and also a possibility to integrate the opposing views regarding the homogenisation of
organizational models and management practice – at least to a certain extent. While
recognizing the pressure on managers to adopt ‘fashionable’ concepts, it suggests that these
ideas will be adapted gradually to the specific organizational (rather than national) context, a
process often referred to as ‘translation’ (e.g. Sahlin-Andersen 1996; Czarniawska and
Joerges 1996). If mentioned at all, consultancies appear to play a rather minor role in this
process. In a way they are seen to ‘plant’ the ideas. In terms of standardisation, the outcome
of their involvement therefore appears less certain even if the ideas they spread are fairly
similar. However, the image of ‘translation’ suggests a rather smooth process and largely
neglects the implications from the literature on the consultancy-client relationship, which
highlights the fact that in many cases the ideas introduced by consultants were contested and
resisted from within the client organization. Only Roevik (1998) appears to at least consider
this possibility when he introduces a ‘virus’ metaphor for new ideas. Theoretically a virus
includes the possibility of rejection, even if this aspect is barely discussed in his work.
What all of these approaches have in common is that they are somewhat deterministic. They
leave little choice to the actual managers who are either driven by the desire or need to imitate
others (reinforced by consulting firms), by the ideas which consultants and other carriers of
- 15 -
management knowledge plant in their organizations or by the national system in which they
operate. (As mentioned above, the only choice they might have in such a scenario, at least
according to certain authors, is to ‘de-couple’ their talk from their action.) All of these
approaches therefore stand in a fairly stark contrast with the empirical research, which has
revealed considerable debates and, sometimes, serious conflicts not only between the clients
and their consultants, but also, and possibly more importantly, among the different actors
within the organizations that employed the consultancies.
In order to better understand the consultancy-client relationship, its influence on the changes
in organizational practices and its outcome in terms of standardization, we therefore need a
more actor-based framework. At the same time, such a framework has to incorporate the
constraints under which all of these actors operate, as identified by the above-mentioned
approaches. The following section will sketch such a framework.
1.2.2 An integrative framework (Hallgeir Gammelsaeter and Matthias Kipping)
As mentioned above, most of the existing frameworks which look at the homogenisation of
management practices in different countries, have a rather deterministic character. By
contrast, the framework suggested here puts the decision-makers in organizations at its centre
and, while acknowledging the (internal and external) constraints under which they are
operating. The reason to make these organizational actors the focus of attention is the fact that
they are the ones directly confronted with the pressures for the increasing similarity of
organizational practices in Europe: they are the ones who decide to hire consultants
(regardless of the latter’s efforts to make them dependent); and they are the ones who have to
implement and routinise the organizational changes after the departure of the consultants (cf.
Kipping and Armbruester 2002).
Thus, our approach stands in contrast to neo-classical economics which is based on single,
atomised actors who calculate the benefits of different strategies and act accordingly. It is
closer to the above mentioned neo-institutionalist tradition within organization sociology (e.g.
Meyer and Rowan 1977, Powell and DiMaggio 1991) which sees economic actors as
embedded (cf. Dowd and Dobbin 1997) and in pursuit of strategies on the basis of widely
shared and implicit assumptions rooted in socio-historical contexts. According to neo-
- 16 -
institutionalists, the idea of the existence of optimal means to every end permeates the modern
economic worldview. Economic actors therefore seek to discover optimal means (Meyer
1994) that are recast as manifestations of natural ‘law’ and thereby institutionalized. Thus, in
the view of the neo-institutionalists economic actors behave according to a belief that they are
operating in a world where means and ends can be optimised. However, in reality this world
is a social creation in which the relation between means and ends is far less calculable and
controllable than those actors prefer to believe. Consultants attempt to thrive on this
uncertainty, because they offer managers temporary relief by disseminating widely recognized
‘best practice’ (see above).
Following the same logic, neo-institutionalists have also highlighted that organizations
basically are identity-seeking entities that constantly make comparisons between their own
structures and those of “others” (Meyer 1994). Since identity is conceived of as relational,
organizations are constantly trying to imitate their role models and to differentiate themselves
from organizations they do not identify with (Røvik 1996, 1998; Sahlin-Andersson 1996). In
this context, consultancy can be viewed as one of the means by which organizations compare
and refurbish themselves, and the recent success of the consultancy industry can be
understood as the effect of its increased ability to commodify and market its products in the
face of the more complex and dynamic environments meeting modern identity-seeking
organizations.
However, while the neo-institutional critique of the neo-classical, calculating economic actor
has been most warranted, neo-institutionalism is itself not fully convincing in explaining how
organizations receive management knowledge. To some extent this stems from the weak
empirical basis of some of its basic tenets, including the thesis that organizations are so
embedded in their social contexts that decision makers take new organizational recipes for
granted (Davis, Diekman and Tinsley 1994). By taking this thesis itself for granted, the neo-
institutional school has largely neglected the role of agency and interests (DiMaggio 1988;
Aldrich 1992; Hirsch and Lounsbury 1997), the importance of interaction and the role of the
recipient in general in the diffusion of knowledge (Sturdy 1999). The thesis of organizations
as basically identity-seeking largely runs into the same inadequacies. Furthermore, the
conception of management as the primary representative of the organization tends to be that it
is united and monolithic. There is no tension between managers, managerial echelons or
expert groups. They seek the same identity. The focus on the persuasive diffusers and the
- 17 -
corresponding neglect of the receptive actors not only lead neo-institutionalism to depict the
diffusion process as a linear process. It also tends to portray managers as indulgent and as
‘gullible victims to clever tricks’ (Sturdy 1999).
Since neo-institutionalism focuses on institutional environments, its depiction of the diffusion
of structural forms tends to disregard the endogenous countervailing forces often found in
organizational values and cultures, informal actions, vested interests, coalitions etc., in short
the mechanisms of obstruction and action treated by institutionalists à la Selznick (1949,
1957, 1996). This also means that the embedded actors of the neo-institutionalism are
portrayed as more embedded in institutional environments than in the contexts of the
organization they represent. Thus, paradoxically, neo-institutionalism is a-contextual as seen
from an old-institutional perspective.
Admittedly, this assertion ignores the mechanism of de-coupling (Meyer and Rowan 1977)
which promises to solve this contradiction by attributing change to the managerial structure
while the operational core is unaffected (cf. also above). This explanation is argued to be
inadequate, however, both because adopted ideas have been showed to influence core
activities and because of its implicit assumption that managerial structures - in contrast to core
activities - are easy to change (Gammelsæter 1991,1994). It follows that neo-institutionalism
do not explicate the interaction between consultants and the organizational actors receiving
management knowledge.
Thus, the study of the interaction between consultants and organizational actors specifically
takes into account that the actors has to answer to both inner and outer contexts (Pettigrew
1985). The outer context can be conceived of as exogenous events, processes, structures, and
social rules that circumscribe yet not determine organizational action. This would include the
cultural dimension (e.g. Hofstede 1980), the socio-political environment and tradition (e.g.
d’Iribarne 1993) as well as the different business systems in which managers are formed and
where they operate (e.g. Lane 1989 and 1995; Whitley 1992; Whitley and Kristensen 1997).
The inner context can be understood as the values, vested interests, enacted views and
patterns of action connected to the existing organization structure (cf. also Nelson and Winter
1982). Like the outer context, this inner context also circumscribes, yet does not completely
determine action.
- 18 -
Carriers of knowledge, such as consultants, primarily operate in an outer context as seen from
the organization level. Consultants appear as a media through which the cognitive rules and
rationalities of the outer context are (re)produced and transmitted. The raw material for their
production activity will often be found in the inner organizational context, however (Dowd
and Dobbin 1997), and in the face of resistance in organizations the consultant may also be
tempted to accept redefinitions of the problem at issue presented by the organizational actors
(Jackall 1988). Yet, external advisors cannot be completely embedded in the internal context
(cf. Kipping and Armbrüster 2002). Even if they can be used, they cannot become real players
in the organizational power game (Fincham 1999).
Similarly, organizational actors can be conceived of as primarily embedded in the specific
context of their organizations. Following Selznick (1957: 16-17), by taking on a distinctive set
of values ‘beyond the technical requirements of the task at hand’ – and understanding
institutionalization as a process that ‘happens to the organization over time’ - the organization
acquires a unique identity it strives to preserve. For management it is a vital role to define and
defend this identity. After all, as Stinchcombe (1968: 107) pointed out, an institution is ‘a
structure in which powerful people are committed to some value or interest’. If the
organization structure in fact is a neatly developed power structure defending the identity of a
powerful management, it must be expected that management, rather than adopt whatever
recipe is presented to them, will resist or otherwise make sure that structural changes do not
threaten their own status and power (cf. Willcocks and Grint 1997; Jaffe and Scott 1998).
Rather than assuming that the management in organizations is completely united, research
indicates that tensions may arise, for instance between (often) younger and lower level
managers and older and higher level managers because the former are more liable than the
latter to initiate changes that violate established strategies and structures (Kanter 1982;
Burgelman 1983). This was also discovered by Chandler (1962: 303) in his seminal work on
the invention of the M-form. Older and higher level managers are probably more prone to
value the privileges derived from long tenures (Stevens, Beyer and Trice 1978), the relational
context in homogenous and stable groups, isolated from their task environments (Katz 1980,
1982), and the established structure as an expression of their own creation (Gammelsæter
1991) than are lower level managers. Accordingly, organizational openness to restructuring is
more likely when organizations undergo top management succession (cf. Helmich and Brown
1972, Tushman and Romanelli 1986, Ford and Baucus 1987, Wiersma and Bantel 1992,
- 19 -
1993). New top managers are often expected to create their own management teams, new
patterns of formal interaction and new values and norms to be built on.
Thus, rather than assuming that a united management is persuaded by eager consultants to
adopt and implement ‘new’ management knowledge, it is suggested that the pattern of
interaction between consultants and management, and the influence of the first on the latter,
also depends on the power structure of the inner context. A general proposition would be that
the influence of consultants will be greater, and the interaction across contexts tighter in times
of instability in the inner power structure. Destabilization often leads to changes in
management and is itself caused by the inability of organizations to meet performance
requirements or by the publicity of events that bring the standards of ethics, security, quality
or environment etc. of organizations into question. At other times, the replacement of top
managers follows natural incidents like retirements, illness or deaths, or strategic actions like
acquisitions or divestments that are so commonplace in business world of today. This
suggests that the inner context is at its most malleable when it is destabilized and new
managers are taking power. In such situations the interface between the inner and the outer
context is being reshaped. The new management often has no need to identify with former
strategies or structures. On the contrary, with new management in office, stakeholders often
expect changes. As a consequence, in periods of destabilization, institutionalized inner
contexts are weakened and representatives of the outer context can be expected to have great
influence on the choices of management. This does not mean, however, that these changes
will take hold automatically or easily, because new managers might find it difficult to
implement them (cf. Kipping and Armbruester 2002).
But interaction between organization management and consultants will not only occure in
times of organizational instability. They are also commonplace in times of inner context
stability, because management knowledge is often presented in guises of rationality, and as
‘neutral’ with respect to the existing top management, However, in these situations we would
expect management to translate the suggestions of consultants in such a way that their
implementation is not violating the power structure of the inner context. This means that the
influence of consultants will be less immediate and more circumscribed by the values, norms
and vested interests of the institutionalized organization.
- 20 -
Thus, in this report, we attempt to understand how the interaction between the pressures and
constraints emanating both from the outer and the inner context have influenced the decisions
of European managers in terms of adopting and implementing new organizational practices.
1.3 Focus, Methodology and Structure of the Report Thus, this report will investigate to what extent European organizations have adopted similar
management models or organizational templates, what role consultants have played in this
process and to what extent these templates were modified to fit with the external (namely
national) context in which these companies were operating and their own internal power
structure. Overall this should enable us to reach some conclusions about the possible
contribution of consultancies to the creation of European management practice.
Two main types of research methods were used to explore these issues. The examination of
the adoption of management innovations in European companies relied mainly on survey
methodologies, based on questionnaires and/or semi/structured interviews. Two groups of
countries were studied:
(1) Britain and Germany, both highly industrialized, but with very different to a certain
extent almost opposite business systems, namely in terms of regulation. As our
previous research has shown, both countries were among those with the highest degree
of consultancy use (‘consulting intensity’) in Europe. They displayed nevertheless
significant differences in terms of the concentration of the consultancy markets, with
Germany showing a significantly larger share of smaller and medium-sized
consultancies.
(2) Spain and Portugal, countries which were much less industrialized, but have been
catching up with the rest of Europe during the last decade of the twentieth century.
While similar in terms of business culture, they differ considerably in terms of the size
and, to a certain extent the orientation of their economies. Consultancies developed
late in both countries, but foreign service providers have made significant inroads
recently, especially in Spain
The second part of this report consists of in-depth case studies, examining the interaction
between consultants and client organizations in the adoption of new management practices.
These case studies cover a wide variety of management models (namely the decentralized M-
- 21 -
form, post-merger integration, human resource management and TQM), a broad range of
activities (from both the private and public sector) and many European countries. While not
representative strictly speaking, this variety should make it possible to gain some more
general insights in the interaction between consultants and their clients in the process of
organizational change and its outcome.
Research for each of the case studies (or sometimes multiple case studies) has relied on
different methodologies, including the exploration of internal (confidential) records or
published documents as well as face-to-face interviews and participant observation. Each of
these methodologies has their advantages and disadvantages. Thus, the more historically
oriented, archive-based studies can rarely include the present situation (for reasons of
confidentiality). But at the same time, they can have a fairly clear view of the actual outcome
of the client-consultancy interaction. By contrast, interview- and participation-based studies
usually examine a process which is still ongoing and where the result will not be known for
some time to come. However, they make it possible to capture this process at a level of detail
and insight which it is not possible to achieve with studies solely based on written material.
Once again, the combination of a wide range of case studies, based on a wide variety of
research methodologies should make it possible to reach some more general conclusions
regarding the role played by consultants in the adoption and/or adaptation of similar templates
across European organizations.
- 22 -
2 Surveys of Management Innovations in Europe 2.1 Introduction (Celeste Amorim and Matthias Kipping)
There has been an increasing awareness that many of the critical success factors that underpin
a firm’s competitiveness are modern management practices. Compared to previous decades,
in the 1980s and 1990s there has been rapid succession of management “recipes” which have
become increasingly broad and intangible. The adoption of innovations is highly dependent
on firm specific factors. These affect on only the decision to innovate but also affect the way
firms innovate, i.e. how they integrate internal and external knowledge available from outside
its boundaries. In addition, and despite arguments of an increasing international
homogenisation of managerial practices, the adoption of management innovations cannot be
detached from underlying national context in which firms operate. These contextual variables
underpin the drivers and obstacles for change at firm level.
2.1.1 Management innovations as ‘new’ resources
In the 1990s there was a fundamental change in the dimensions of management models.
Compared to previous decades there was not only a rapid succession of different management
innovations, but they also became increasingly broad and intangible, going beyond production
and production-related functions. These affect all the functional areas of the firms, and
include firm governance and control. They also include internal and external interfaces with
the environment, having a crucial impact on firms’ ability to create, develop, identify, absorb
and use internal and external knowledge. Management aspects are thus understood as the
intangible dimension of innovative capacity of the firm. In a context of increasing
competition, a firm’s capacity for continuous change –and the management aspects
underlying it– are increasingly important for creating and maintaining competitiveness.
Management practices are highly firm specific. Yet, they are also rooted in national system of
innovation, as can be seen from studies in evolutionary institutional economics. These studies
made significant contribution to a systemic and path-dependent view of the innovations. They
are understood as the result of cumulative interaction and learning processes involving
different actors, constrained to the institutional and socio-cultural context in which the actors
are embedded. The systemic conditions have a substantial impact on a firm’s capacity to make
- 23 -
innovation decisions and on the kind of innovations they introduce. The emerging knowledge-
based view of the firm has also revitalised interest in the means by which firms acquire
knowledge from outside the firm’s boundaries (Nonaka 1994). Within the growing sources of
management and organisational knowledge, and of growing policy significance are
management consultants (cf. Havelock 1969; Barley and Kunda 1992; Fridenson 1994;
Guillén 1994; Bessant and Rush 1995). Their empirical-analytical capabilities and the
dissemination of knowledge among consultancies own staff across continents, countries,
industrial sectors and functional domains are assumed to provide the supply of information
necessary for successful strategies and change processes of their clients, including on the
introduction of technological innovation (Hansen et al. 1999).
Thus, there is a strong case for mobilising this resource within the framework of regional and
national policies designed to promote development of new competencies (e.g. technological),
especially in the case of small and medium-sized enterprises (SMEs). Indeed, governments
increasingly got actively involved in some way in supporting management and organisational
innovation using the most diverse mechanisms. In addition to the traditional package of loans
and subsidies for investment, they adopted complementary instruments; one of these has been
the increasing use of consultants as part of an emerging strategy of technological competence
building at a national and regional level. There has been several attempts from different
European governments to involve the consulting sector, leading to an increase in consultancy
use even amongst SMEs, traditionally less open to the use of external consultants (Bessant
and Rush 1995; Bryson 1997). Initiatives have been taken on both the demand and supply
side. A typical example of the kind of consultancy-based schemes now operating in many
countries is the UK’s Enterprise Initiative launched in 1988, or the business link initiative
launched by DTI in 1992. In this regard, Bessant and Rush (1995) summarised the major roles
played by consultants as part of large promotion and diffusion policy programmes, ranging
from capability building to decentralisation of operations.
Behind the general trends, consulting use largely depends on the culture of the organisations,
internal politics, nature of the expertise required and so. And these also differ across national
contexts. Thus, comparative studies on the characteristics of their activities are of great value
and timely. Important differentiating characteristics are related to type of service providers,
areas of expertise, barriers on implementing changes during consulting assignments and
evaluation of their of their activities.
- 24 -
2.1.2 Characteristics of management innovations
Management innovation is a much broader concept than technological innovation. It can be
understood as a significant change in strategy, structure and processes of an organisation,
which can vary in its scope (from one to all management areas. It thus has a multidimensional
character. Some firms engage in significant management change introducing in simultaneous
a number of management innovations. In this line, management innovation can be
differentiated accordingly to its scope. The scope is “narrow” if the innovations covered only
a limited range of management areas. Management innovation with “broad” scope indicates a
comparatively broad range of managerial areas. A broad scope change might depart
significantly from current firm practices, reflecting what Normann (…) termed “radical”
innovation.
The adoption of an innovation is a choice made by a particular firm. It follows that differences
between firms may have a potentially important role to play in explaining patterns of
management innovation. Thus, one first aim with many innovation models is to identify
interesting and relevant firms characteristics which impact on innovation adoption (Rogers
1962; Geroski 2000). Firm size turns out to be a very commonly explored variable in the
empirical literature on diffusion literature. Specifically concerning management practices,
firm size has been found positive related to adoption of new employment involvement
practices (e.g. Lawler et al. 1992), BPR (Newell et al. 1999) and M-form (Fligstein 1985;
Whittington and Mayer 2000) for example. Yet, the link between size and organisational
innovation is not so clear-cut. As argued by Hannan and Freeman’s (1984) population-
ecology theory, as organisations grow, the potential costs of change also grow implying
structural inertia. Similarly, their perspective argues that as organisations age they tend
towards structural inertia. Insofar as the Hannan and Freeman argument is applicable to
innovations such as BPR and TQM, one would expect younger and smaller firms more likely
to adopt management innovations than older and larger ones.
Company business is also expected to influence innovation. Chandler (1962 and 1990) as
argued that certain industries were more likely to adopt the M-Form for example. Certain
industries are more prone to diversification strategies, and this will lead them to adopt the M-
Form. Most innovations considered in the thesis have traditionally been applied in
- 25 -
manufacturing organisations and have only recently begun to influence service organisations.
Quality management is a case in point (Benson et al. 1991) in this regard. Nonetheless,
Newell and colleagues (1999) found high adoption rate of BPR in service industries than in
manufacturing for example. Firms’ international exposure (e.g. MNEs subsidiaries) has been
also pointed out as an important distinct variable for innovation (Lindvall and Pahlberg 1998;
Veuglers and Cassimano 1999). Due to their organisational complexity and intra-MNE co-
ordination practices, subsidiaries of MNEs are more exposed to a broad range of external and
internal stimuli. Supposedly, they are also endowed with ample resources to fund their
activities, and hence have the capacity to innovate more. Finally, macro national
environmental differences impact on diffusion of innovations (Nelson and Winter 1982;
Abrahamson 1996; Robertson 1996; Casper and Hancké 1999).
2.1.3 Integrating external management knowledge
The supply of management advice has expanded rapidly, leading to the emergence of a large
variety of consulting providers, ranging from the large international to the domestic
consultancies, individual consultants and even others such as public, professional and
academic institutions (EU), some of them sponsored by the government. The international
consultancies seem to have been the main beneficiaries from the development of the
consulting business. The new business environment combined with their aggressive market
approach lead to astonishing expansion and development of their businesses over the 1980s
and 1990s.
However, there is also the case that domestic markets are characterised by the presence and
relevance of domestic consultancies, either large or small, some one shop man. They coexist
with large international consultancies (EU 1986-92; Tordoir 1995; Armbrüster and Kipping
1999). From the demand side perspective, it has been suggested that a dual economy might be
emerging, with SMEs using mainly small and medium domestic consultancies (SMC) and
large and MNEs firms using mainly international consultancies (Tordoir 1995). Country
characteristics may also interfere with the use and assessment of consultants. Despite an
increasing homogenisation in terms of consultancy markets, country specific conditions are
still important. On the one hand, demand side conditions are affected by economic cycles,
country specialisation and tradition in the use of consultants. Tordoir (1995) argues that
tradition is the main explanatory variable explaining the low level of use of external support
- 26 -
in Germany. On the other hand, characteristics of the supply should also be considered. The
supply of management consultancy developed in different countries with relative time lags,
and enjoyed different levels of reputation across countries (Kipping 1996 and 1999; Kipping
and Engwall 2002). As a result, the dominant players in each market may also differ (Kipping
et al. 1998).
Consultants may be playing distinct roles on the management innovation process. One the one
hand they can play the conventional roles of “experts, extras or facilitators” (Tisdall 1982). In
this perspective their role ranges from pure catalysts for change to fully implementers of
innovations and/or auditors. They can stimulate innovation by presenting new management
ideas to potential customers in seminars, demonstration session, publications for example.
Managers might also decide to introduce some managerial innovations following training
provided by consultancies for instance. In many circumstances consultancies can also be
employed as “analysts” to provide a mere diagnosis on a particular issue (e.g. QAS compared
to standard norms, HR evaluation, company SWOT analysis). Otherwise, consultancy
assignments can be very similar to an “architect’s” job (Tordoir 1995). In this case the
consultant suggests changes and drivers for action, and might even plan the implementation.
However, the client decides and presides over the implementation process itself. A more
ambitious service is that in which the consultant acts as “doctor of management” (Nees and
Greiner 1985) getting actively involved with the implementation of managerial innovations.
The consultant sits next to the client in designing and controlling the assignment, and ensures
that its suggestions are indeed going to be implemented. Especially in this case there is
normally a rich interaction between external and internal staff and knowledge transfer might
be more effective. Finally, firms can also use external consultants for post-implementation
auditing purposes.
Yet, criticisms to consultants work flourished, and public policies promoting their use have
been increasingly challenged (Micklethwaite and Wooldridge 1996; Bennettt and Robson
1999; cf. also above). Amongst the numerous factors affecting decisively the consulting
assignment are those related internal barriers for change during the assignment. Change
programmes not only affect companies’ systems and procedures but also their people
(Gilgeous and Chambers 1999). Firms’ activities are of routine type (Nelson and Winter
1982; cf. Kipping and Armbruester 2002) and difficult to change. On the one hand, there is a
natural internal resistance to change due to inertia and “not-invented here” syndrome. On the
- 27 -
other hand, consulting assignments may fail due to lack of absorptive capacity, i.e.
capabilities to learn, interpret and implement knowledge and practices induced by consultants.
Another factor concerns client managers’ commitment to the project. They are the ones that
ultimately have the capacity to introduce changes. Indeed, the lack of client involvement has
been often found critical for the success of any consulting assignment. In addition,
coordination within the project team is also a critical factor (Tordoir 1995; Shapiro et al.
1993).
A final issue concerns the evaluation of consultants’ job. This however it is not an easy
neither objective analysis. “The outputs of business service advice and use of information are
a change process, not an instantaneous transfer like the purchase of a good” (Bennett and
Robson 1999, referring to O’Farrell and Moffat 1991). The outcome is often long-term,
inherently intangible, and its effects difficult to separate from other influencing factors. Thus,
we focus our evaluation here on clients’ satisfaction with several issues of past consulting
experiences. This type of methodology has been used in previous studies, such as those
evaluating the services from business shop and business connect services in the UK (Bennett
and Robson 1999). Satisfaction offers considerable advantages over impact assessments
because it does not require control and comparison groups (cf. Bennett and Robson 1999,
referring to DTI 1997).
Investigating management innovation and the role of consulting advice is thus arguably of
central importance for understanding contemporary economic change. The issue is of greater
importance from the point of view of peripheral economies urging to catching-up in terms of
new management and organisational forms. Yet, the issue has been empirically analysed
mainly within the most developed economies, while lesser developed economies remained
largely overlooked by scholars. The following parts of this chapter will therefore report on
surveys of management innovations during the 1990s, in two of the most developed European
economies (Germany and Britain) and two of those which have been catching up during the
same decade (Spain and Portugal).
- 28 -
2.2 Germany and Britain (Simone Strambach) 2.2.1 Introduction1 The aim of this chapter is to analyse the effects of the different systemic socio-economic
contexts, which shape the national and regional innovation systems, on the processes of
interaction and learning in relation to organisational innovation in firms.
The German and the British systems have different patterns of economic structures, industrial
relations, research and education and training systems, labour market institutions, and
governance structures. A comparative study of organisational innovations in Great Britain and
Germany is interesting because this type of innovation would appear to have been introduced
earlier in the British system. Many of the models for organisational innovations in the 90s,
like lean management or business process reengineering, originated in North America and
were imported from into the European countries. The big international consulting firms
played a major role in this process (Eims 1996). There is plenty of evidence which suggests
that organisational ideas were taken up first in Britain. The similarities in the innovation
systems of the Anglo-Saxon economies (Porter 1991) and the fact that the countries are socio-
culturally close have probably been contributing factors here.
International comparative studies have shown that the absence of organisational innovations
in Germany contributed to the loss of competitiveness and innovativeness in the early 90s.
Because of the path dependence of learning processes and the inertia of institutionalised
structures, it is very difficult to reconstruct existing organisational structures and processes. It
seems that, in the past, the institutional arrangements of the national system reinforced the
focus on technological reorganisation at the firm level and this meant that the non-technical
potential for increasing productivity, such as firm and work organisation , was not sufficiently
exploited (Bender 1996, Dreher et al. 1995, Priewe 1997). Drawing on empirical studies of
industrial companies, Meyer-Krahmer (1999) speaks of ‘organisational conservatism’ when
referring to management that is unwilling to adopt new concepts.
1 The author is grateful for the financial support of the Federal German Research Association (DFG) as part of the research programme ‘Technological Change and Regional Development in Europe’. Particular mention should be made of the help given by Dr. Matthias Kipping, University of Reading, for his support with the collection of data in the UK and for the fruitful discussions at the empirical stage of the project.
- 29 -
With this as background, the present study considers two questions.
- What differences can be established between the innovation patterns of firms in the two countries? and
- To what extent are these differences rooted in the systemic conditions of the different innovation systems?
The chapter reports the empirical results of a survey of firms in the two countries, examining
differences and similarities in organisational innovation patterns. The relationship between the
institutional environment and the innovation processes of the firms is analysed. The focus of
the final section is on the policy dimension and some implications for innovation policy
which follow from the empirical results.
2.2.2 Sample and methodology
The structural difference between the areas of the study - the Stuttgart region in Baden-
Württemberg in Germany and the Greater London region in south-east Britain – was the
reason for their selection. Stuttgart, whose structure is still dominated by industry, is
representative of the German innovation system; the service economy of the London region is
representative of the advanced structural changes in the British economy.
Table 2.2.1 Response rate
Stuttgart region (absolute)
London region (absolute)
Total (absolute)
Questionnaires 27 23 50 Interviews∗ 21 22 43 Total 48 45 93 Net-Sample 141 147 288 Reply rate % 34.7 % 30.6 % 32.3 %
∗ In addition to the interviews with the companies, 11 further interviews were conducted with intermediary institutions in both countries. Source: own data A mixed method with two instruments was used to analyse the question in the survey. First, a
standardised written questionnaire was used in both countries to obtain primary information
about organisational innovations that took place in the 90s. In a second step, qualitative face-
to-face interviews with firms, politicians and intermediary institutions were carried out in both
countries.
The firms were selected using the ‘theoretical sampling’ method. A statistical probability
theory sampling procedure could not be used as there are no data sources, either for Germany
- 30 -
or for Britain, which contain valid information about the implementation of organisational
innovations and therefore could allow the parent population to be determined. This is why
representativeness could not be the criterion for inclusion in the study as it was in the case of
the quantitative method. Instead, the criterion had to be how suitable the cases were for
answering the theoretical questions. The present study used two criteria for the inclusion of
firms – the branch and the size of the firm. Firms were chosen from the branches typical of
the respective regions in both the industrial and service sectors. A minimum firm size of 150
employees was set because organisational innovations are mainly important for the larger
firms. The particular structures of small and very small firms means that their organisational
problems can be solved often on an ad hoc basis.
Table 2.2.2 Response by sectors
Stuttgart region London region Total Sectors absolute % absolute % absolute Manufacturing Industries
30 62.5 22 48.8 52
Service Industries
18 37.5 23 51.2 41
Total 48 100 45 100 93 Source: own data 2.2.3 Number and types of organisational innovations implemented
The organisational innovations of the nineties, such as total quality management systems,
implementation of process oriented re engineering, or empowerment of units of the firm, are
changes which do not focus only on technological optimisation of the firm’s material
transformation processes. Essentially, these kinds of innovation alter the interaction and
communications relationships within the firm and at its interfaces with the environment. The
particular kind of firm organisation influences the way external and internal know-how
resources are integrated, how the linking of competencies and their applications take place.
Organisational innovations therefore influence the learning capacity of the firm. As the results
of the survey show, this kind of innovation is increasingly relevant for the firm’s ability to
adapt to the rapid changes in its markets and environment and to increasingly intensive
international competition. In the years from 1989 – 1998, the firms in both countries made a
major organisational change every two to three years, which corresponds to an average of 4.3
changes implemented by each firm. There are no significant country-specific differences in
the number of organisational innovations implemented between Germany (4.5 changes on
- 31 -
average) and Great Britain (4.1 changes on average). In both countries, only 2.2% of the firms
had carried out none of the organisational restructuring measures listed in figure 3.1.
Fig. 2.2.1 Percentages of organisational changes implemented (own graph). Differentiating the projects implemented by type of organisational innovation shows that the
most common innovation is the introduction of a total quality management system (TQM).
84% of firms in the sample have now changed their organisation to focus on quality. This
means here we can speak of a change that is already well established. Priorities in both
Germany and Great Britain in the 90s were total quality management systems (TQM),
followed by lean production/lean management, downsizing, and process oriented re-
engineering. The components of these measures are rather similar and include customers
orientation, full understanding of quality, orientation towards processes, decentralisation of
decision making and communication structures, and development of human resources in order
to increase performance. It can be concluded that both countries consider the same
organisational principles appropriate for increasing the adaptability and productivity of the
firms in the present period of structural change.
0 10 20 30 40 50 60 70 80 90
[in %]
Others
Merger and Acquisition
Making unitsindependent
Outsourcing
ContinuousImprovement (CI)
Group and Team Work
Re-engineering
Downsizing
Lean Management/Lean Production
Total QualityManagement
- 32 -
The interviews with the firms showed that, in both Britain and Germany, organisational
changes in the firm do not only take place sequentially, they are also sometimes carried out in
parallel. It is often a case of ‘both at once’ rather than ‘either or’. Firms link and combine
different organisational restructuring principles, e.g., TQM with process oriented re-
engineering and downsizing. Different models are often used in different parts of the same
firm and these are sometimes based on contradictory principles so that their effectiveness is
reduced. Moreover, the people in the firm who are responsible for the changes interpret and
implement the models differently. Firms can implement TQM as a higher level framework
within which a process of change affecting the whole firm takes place or they can introduce
TQM as a subsidiary concept within a much more comprehensive innovation concept (e.g.,
lean management).
A major finding of the study therefore is that the importance and content of individual
organisational innovations are determined by the firm-specific context in which they are
introduced and applied. Compared to technological innovations, which for maximum
performance are also adapted to the individual company, organisational innovations are to a
much higher degree social constructs, whose content has to be seen as context dependent.
Organisational innovations therefore cannot simply be imitated or copied from other firms.
This can also explain why their diffusion and implementation is often so difficult.
2.3.4 Motives for organisational innovations
There are many reasons why the firms surveyed implemented organisational innovations.
However, in all cases, the trigger was a crisis situation, which could differ in quality, and have
different causes, but which nevertheless was seen by the firms as a crisis and a problem
situation.
Management and organisational research has shown that the processes of organisational
learning and innovation are, on the one hand, introduced as a reaction to external
environmental changes and the resulting insecurity, but that, on the other hand, factors
internal to the organisation can also be responsible for their introduction (cf. Chandler 1990,
Dodgson, 1993). In many cases, internal and external factors influence one another and are
- 33 -
closely interrelated. One main point emerges clearly when firms talk about the problem
situations they see as inducing change.
Problem situations internal to the firm obviously were less frequently given as the reason for
organisational learning processes than external factors were. Increasing competition and the
serious economic recession at the start of the 90s were given by the firms in both countries as
major reasons for introducing organisational adaptations. In most cases, changes were made
necessary by tougher competition, shrinking markets, a declining customer base, and the
resultant fall in earnings. In addition, there was increasing pressures on prices caused by
international competition. Quantitative economic indicators, such as sales revenue and profits,
were what made most of the firms aware of the existence of a problem situation which made
changes necessary.
Customers’ new requirements provide the second important external incentive for
organisational innovations, especially for supplier chains. This applies particularly to quality
related innovations. Customers, directly or indirectly, encourage their suppliers to set up
particular quality control systems in their organisations. These can include quality control by
certification according to ISO 9000 or systems defined by the customers themselves. The
automobile industry, which appears to exert considerable pressure in this direction on its
suppliers, is a key branch in this respect. This was found to be the case in both Germany and
Britain. In the Stuttgart region, the demands of the car manufacturers were a major reason for
the implementation of quality management systems by firms in the electronics branch and in
the mechanical engineering branch which produce specialised machines for the car
manufacturers. The suppliers in Great Britain, who in many cases had already met the British
quality standard (BS 5750) by the late 80s, cited pressure by their most important customers
as the reason why, in order to obtain this certification as well, they introduced standardised
control systems corresponding to the international standard ISO 9000.
This shows that it is mainly pressure from the organisation’s environment that makes the
necessity for organisational changes and innovation apparent. As this pressure increases, so
too does the willingness to change. This is illustrated by a machine tool manufacturer in the
Stuttgart region, which as late as 1998 did not have a standardised quality management
system as part of their organisation. The reasons given for this were as follows:
- 34 -
Our international competitors are not yet certified, and our customers do not yet demand certification, otherwise, we’d have to catch up. The strength of our company is our international market presence and our structures have been neglected so far, i.e., there have been few organisational changes. However, we do have a problem in that many interfaces are not efficiently integrated. (Interview_D: 19).
The company supplies a niche market and 99% of its sales come from the export of customer-
specific machines to Asia. The company’s positive economic situation means that it is not
willing to introduce organisational innovations, even though internal problems are seen to be
quite important. This result accords with a pilot study of the international transfer of
organisational innovations. The study makes the general observation that firms which had
some awareness of a crisis situation were more open to implementing the processes of change
(EIMS 1996, p. 85). The interviews showed not only that external pressure is the
trigger/stimulus for learning processes, which could be called adaptive learning, they also
showed that this organisational processes of learning and innovation stimulated differ in their
depth and intensity.
2.2.5 Internal and external knowledge in organisational innovation processes Firms largely rely on external expertise for the complex learning processes associated with
organisational innovations. In both countries, 80% of the firms which participated in the
written survey used external knowledge to different degrees and from various areas of
knowledge in the implementation of organisational innovations. The percentage was even
higher for the participants in the interviews. By far the most common way of obtaining new
knowledge is to ‘buy’ expertise primarily from private knowledge-intensive service firms and
this results in a transfer of knowledge between the consulting firms and their clients. By
contrast, relatively few firms in Germany or in Britain acquire external knowledge by
employing specialists who have the innovative know-how and experience with the processes
of organisational innovation.
Universities and research and technology organisations are seen as the important actors in
innovation systems. Differentiated technology and knowledge transfer institutions are
characteristic of the innovation systems in both the countries.
Table 2.2.3 Firms’ external knowledge sources in organisational innovation processes
- 35 -
External institutions Number of cases
%
Private knowledge-intensive business services 40 80 Public/semi-public institutions 9 18 Private and public institutions 9 18 Private institutions only 31 62 Public institutions only 0 0 Private knowledge-intensive business services belonging to the own firm group
8 20
No external knowledge 10 20 Source: own data There are many different research and technology institutions which carry out a wide range of
tasks and services including basic research, technology transfer, and applied research. In
Germany, these intermediary institutions have a long tradition and are mainly industry and
technology oriented. Numerous regional science studies have shown that the widespread
decentralised knowledge and technology transfer structure in Baden-Württemberg is a major
strength of the regional innovation system (cf. Cooke/Morgan 1994, Pyke/Sengenberger
1992). In the research area, universities , technical universities Max-Planck Institutes and
Fraunhofer Institutes are considered to be the most important actors at the local level. In the
area of technology and knowledge transfer, the Steinbeis Foundation, the German Economy
Rationalisation Committee, and the Chambers of Industry and Commerce are the important
actors.
Since the end of the eighties efforts have also been made in the UK and a number of
organisations has been created whose task is to support at the local level the capacity of firms
to innovate (cf. Bennett/Wicks/McCoshan 1994). The institutions cover research and
technology transfer and also provide support in the fields of training and management issues.
Universities, colleges, business schools, government laboratories, business links, training and
enterprise councils (TEC’s), and enterprise agencies were identified as functionally equivalent
institutions in the UK.
The firms were asked about their utilisation of, and participation in, these intermediary
institutions in order to discover the role they played in organisational innovation processes. In
Table 2.2.3, the answers relating to the different intermediary institutions and organisations
were aggregated under the heading of public and semi-public institutions. Knowledge
obtained from public and semi-public institutions seems less relevant for firms’ organisational
innovation. None of the firms surveyed, in either the Stuttgart or London regions, had had
- 36 -
assistance only from public or semi-public institutions. A number of firms used this assistance
in conjunction with that from private suppliers, in most cases as part of certification
processes, because the certificates are obtained from these institutions (cf. Table 2.2.3). Public
institutions play a minor role in the intermediation process and thus in the transfer of
knowledge. Knowledge transfers in the context of organisational innovation processes mostly
take place in the private market, directly between the customers and the knowledge intensive
service firms.2 One reason is certainly that, with organisational innovations, what is needed is
not primarily pure technological knowledge, other areas of knowledge in the fields of
economics and the social sciences are also important for innovative problem solving. The
close connections the firms surveyed have with the external knowledge-intensive service
suppliers shows how very relevant external expertise and competencies from different areas
of knowledge are for organisational innovations. It is not only business and management
consultants whose competence is in the organisation and management of firms who
participate. So too do knowledge-intensive service firms from other fields of knowledge.
These include firms which can provide external knowledge in data processing, training and
further education, and technical engineering (cf. Table 2.2.4). The knowledge required, which
goes beyond individual disciplines and fields, cannot normally be obtained from public
institutions.
Table 2.2.4 Use of external knowledge-intensive services Area of knowledge Absolute % Organisation and Management 22 56, 4 Data processing 16 41, 0 Further education, training 11 28, 2 Technical engineering services 10 25, 6
Source: own data These indicators show the multi-dimensional character of organisational innovations, the
interdependence of organisational and technological changes and the resulting higher
demands on employees. Various external firms are involved in the projects, which take on a
wide range of different roles and the functions associated with them. The set of roles ranges
from information suppliers, and catalysts who mobilise internal sources, to diagnostic,
training, and process associated functions. These roles are normally filled by different
suppliers but they can also be filled by a single consulting firm which switches roles in the
2 Current studies of technology transfer in Germany in general also show that these take place mostly between the customers, the technology using firms, and the suppliers, where the suppliers of technology are mostly other firms(cf. Rheinhard/Schmalholz 1996).
- 37 -
course of the innovation process. The number of external service and consulting firms
involved depends on the extent and scope of the projected changes and also on the size of the
firm and the organisation-internal knowledge. Table 2.2.5 provides a general outline of the
extent to which external firms are involved. Above all for large companies, and company
wide changes, the range can extend to more than 20 external knowledge carriers.
Table 2.2.5. Number of external knowledge-based service companies Number of external companies
Number of occurrences
%
1 to 2 cases 13 44.8 3 to 4 cases 11 37.9 5 to 10 cases 3 10.4 11 to more than 20 cases 2 6.9 N* 29 100.0
* 11 of the 40 companies who used external service companies did not indicate how many. Source: own data The number and the different branches and fields of knowledge of the external firms involved
show the complex interaction and communication processes associated with organisational
innovations which occur within and between firms. The kind and amount of external
knowledge required often shows up only during the innovation process. A detailed analysis of
the learning processes is beyond the scope of this paper. However, it can be said that there is a
large variance in the results for the same organisational innovation in different firms, both in
the Stuttgart and the London regions. It is obvious that the quality of the results is strongly
influenced by the quality of the interaction and learning processes which occur during
implementation. The results of the organisational innovation projects are determined by the
quality of the two main actors – the customer and the service firm. The competence and
experience of the latter is important, but so too is the ability of the customer to use the
external knowledge and to integrate it into its own organisation and, not least, the ability of
both actors to design the interaction process.
2.2.6 Differences in organisational innovation patterns A lack of organisational innovation proved to be a crucial factor in the loss of competitiveness
by German companies at the start of the 90s (cf. Naschold 1994, 1996, Braczyk 1994).
Various efforts were made to implement technical innovations but organisational innovations
were neglected, as is shown by comparisons between companies in the USA and Japan
(Jürgens/Naschold 1994, Schienstock 1997). International comparisons of the structural
- 38 -
changes at the macroeconomic level indicate that in Germany business -related service
functions, in particular, tend not to be transferred to outside firms. The significant difference
of Germany is not in its general services deficit, it is in the different institutional organisation
of business related service functions (DIW 1996, Strambach 1997a). The business services
segment is also under represented in Baden-Württemberg compared to the national level.
Even in 1997 Baden-Württemberg was not yet at the national level, its business services share
of employment of 5.5% was still a little lower. (Strambach 1997b, 1998). Empirical studies of
the outsourcing behaviour of firms in Baden-Württemberg conclude that outsourcing has only
taken place on a small scale and that a large potential outsourcing still exists (cf.
Zahn/Soehnle 1996). Substantial empirical research in main industry branches of Baden-
Württemberg point out that, by focussing mainly on technological reorganisation, the non-
technical potential for increasing productivity had long been neglected (cf.
Braczyk/Schienstock 1996, Cooke 1996, Morgan 1996).
Certainly, regional innovation systems are not simply small scale national systems because
they combine elements that are specifically regional, national and even international, but the
corresponding empirical indicators on the national and regional level let suggest, that the
framework of constraints and incentives of key national infrastructural institutional set up, the
industrial relations, the labour market institutions and the education and training system,
determine the innovation patterns of organisational innovations. Comparing the two countries
in this study in terms of the period in which TQM was introduced shows that 60% of the firms
which had begun to introduce this far reaching change before 1991, i.e. relatively early, are
located in Britain. Moreover, at the start of the 90s, more British firms than German firms
were implementing TQM. Only in the second half of the 90s did German firms have a larger
share (cf. Figure 2.2.2.). These results show that firms in the London region implemented
TQM earlier than those in the Stuttgart region.
- 39 -
Fig. 2.2.2 Percentage of companies in Germany and Great Britain, which have implemented Total Quality Management (TQM) in the 1990s (own graph) There are significant differences between Germany and Great Britain in the way three kinds
of organisational innovation are implemented - The introduction of cross-functional group and
teamwork, process oriented re-engineering, and outsourcing (cf. Table 2.2.6). The largest
difference was noted in the area of organisational changes related to outsourcing. More than
87% of the firms which introduced outsourcing in the 90s were German, while only 12.5%
were located in Britain.
Table 2.2.6 Organisational innovations implemented in Germany and Great Britain
Projects Germany Great BritainOrganisational innovations Total % %
Total Quality Management TQM
42 52.4 47.6
Continuous Improvement systems
22 50.0 50.0
Lean Production/ Lean Management
29 55.2 44.8
Downsizing 27 55.6 44.4 Cross-functional group and teamwork
23 60.9 39.1
Process-oriented re-engineering
25 60.0 40.0
Making units independent 14 50.0 50.0 Outsourcing 16 87.5 12.5
100
0
10
20
30
40
50
60
70
80
90
Before 1991 1991 and 1992 1993 and 1994 1995 and 1996 1997 and 1998
TQMGermany
TQMGreat Britain
- 40 -
Mergers and Acquisitions 14 42.9 57.1 Others 5 80.0 20.0 Total Projects 217 57.1 42.9
Source: own data There are numerous indicators which show that the difference observed is the result of the
firms in the Stuttgart region catching up. Looking at the years in which outsourcing was
implemented, it is obvious that none of the German firms in the study made this kind of
organisational change in the late 80s. 1993 is the earliest year mentioned for outsourcing by
the German firms in the Stuttgart region. Further evidence can be deduced from the
organisational structures of the firms. 68% of the firms which had an above average number
of internally differentiated functional areas were German and less than a third were British.
The proportion of German firms that implemented process oriented re-engineering projects is
20% higher than that of British firms. Here too, a catching up process seems to have taken
place. According to a survey by the Fraunhofer Institut für Arbeitswirtschaft und Organisation
(Fraunhofer Institute for Labour Economy and Organisation) only 5% of the firms surveyed in
Germany were implementing re-engineering projects in spring 1994. However, 45% claimed
that they were planning such projects and 50% were discussing possible projects (cf.
Bullinger/Roos/Wiedmann 1994, Fraunhofer Institut für Arbeitswirtschaft und Organisation
1995). The results of the present study show that, only four years later, the share of firms
involved in re-engineering had increased twelve-fold. It can thus be said that process
orientation as a basic principle of design and organisation had now become widely accepted
among German firms. These results also throw some light on the speed with which
organisational innovations have spread.
Organisational innovations generally take a long time. Even though the time needed to
implement projects is influenced by the extent and scope of the individual measures, it can
nevertheless be seen from table 3.7. that most projects took on average from two to three
years to complete. Picto/Böhme (1995), who examined business process re-engineering
projects, also found that, while in some cases more than four years were necessary, in general
the average period was two years.
There is a marked difference between the countries in terms of the time taken to complete
projects. British firms indicate significantly shorter implementation times for the different
- 41 -
organisational innovations. According to the average project times shown above, British firms
need six months less time for TQM and CI projects. For outsourcing and process oriented re-
engineering the times were respectively eight and seven months shorter. The biggest
difference between British and German firms is with the introduction of lean production/ lean
management. The completion time for these projects in Britain is more than one year less than
the average for the firms as a whole.
Table 2.2.7 Average time to complete projects for organisational changes Organisational innovations Duration in years
and months Total Quality Management TQM 2, 7 Continuous improvement systems CI 1, 8 Lean Production/ Lean Management 2, 8 Downsizing 2, 0 Cross-functional group and teamwork 2, 2 Process-oriented re-engineering 3, 1 Making units independent 3, 3 Outsourcing 1, 8 Mergers and Acquisitions 2, 3
Source: own data In summary, it can be said that by the end of the 90s there was no evidence, from the survey
or the interviews, that the German firms were still lagging with regard to organisational
innovations, at least from a quantitative point of view. The situation had clearly changed since
the discussion about their competitiveness which had dominated the early 90s. However, the
empirical results show that, with regard to the time dimension, the patterns of innovation in
the two countries are different. It is quite evident that the British firms adopt the
organisational innovations earlier, and the more rapid completion, which stems from the
shorter implementation stage, indicates that the organisational learning processes are
different.
From a systemic point of view firms’ organisational learning processes take place in the
interaction with their institutional environment. The question now arises of how much the
different innovation patterns in the two countries are related to the different socio-economic
frameworks and the systemic features of the innovation systems in which the firms are
embedded.
2.2.7 The Influence of institutional contexts
- 42 -
The different labour relations and labour market conditions faced by the firms in the two
countries provide one answer to the question of which factors are responsible for these
differences. In Britain the deregulated labour market allows organisational restructuring
measures to be implemented quickly and flexibly, although this often has drastic
consequences for employees. For example, this is shown by the following quote of the
manager of an industrial supplier for large electronics and telecommunications companies in
London:
Since much of value added in the current businesses is labour, we pay much attention to downsizing (or increasing) the workforce in line with the business cycles. Decisions in this respect are based on the forward order book. It allows a quicker reaction than the management accounts which only look at the past. Reducing the work force is relatively simple since those who have been with the company for less than two years only require one week’s notice. The notice period increases by one week for each subsequent year. Following the downturn in 1996, the company introduced lean management, by cutting three of the middle management positions. (Interview_UK: 8).
The conditions under which German firms operate are different because the laws which
govern the labour market, which provide protection from dismissal and the right of employees
to co-determination, limit the firms’ scope for action. The works councils have to be informed
about dismissals and have the right to be consulted about restructuring (cf. Ebbinhaus/Visser
1997). Extensive organisational innovations usually modify existing work rules, working
hours, and wage structures. The works councils have a co-determination right in these matters
and are required to participate as representatives of the interests of the employees. In contrast
to Great Britain, the institutional regulation of labour relations in Germany means that the
interest groups affected must be informed and negotiate an agreement before organisational
innovations can be implemented. This interaction process takes far more time than a ‘top
down’ strategy, where only the efficiency of the firm is considered, and more time than a
short-term market oriented strategy, that considers only the requirements of the market, both
of which the deregulated labour relations make possible in Britain.
Other explanations factors for the shorter implementation periods for organisational
innovations in Great Britain are the different work and management cultures, which have
been observed in comparative international studies of European business systems and
analyses of the respective corporate governance structures (cf., Becker/Vitols 1997,
- 43 -
Heidenreich 1998, Hickson 1993, Lane 1992, Soskice 1996, Whitley 1992,
Whitley/Kristensen 1997).
In Great Britain conflicts have traditionally been resolved to a much larger extent at the firm
level. The different institutional regulation of employer-employee relations means that
negotiations at the branch level are relatively unimportant. The system makes higher demands
on management in terms of its responsibility for human resources management. Involving
colleagues, dealing with opposition and conflict, and motivating workers, whose job mobility
is high, are abilities which have far more influence on the education and career paths of
managers in Britain than in Germany. The value of a general management education, which is
reflected in the institution of the ‘Business School’ shows that management know-how is
valued far more highly in the British system than in the German system.3 By contrast, in
Germany management is not considered to be an separate generally definable activity that can
be learned (Lane 1992, 1997, Heidenreich 1998). The results of comparative empirical studies
show that the organisation of work and the ‘management culture’ in Germany are influenced
more by specialised expertise, mostly technical and technological. Management as such is not
considered a specific function, it is carried out by managers who have mostly attained their
positions and functions in the firm by virtue of their technical qualifications (cf., Lane 1992,
Warner/Campell 1993).
These differences are particularly relevant for organisational innovations. Organisational
innovations require a far greater knowledge of management and social skills than
technological innovations do in order to initiate organisational restructuring processes and to
guide and accompany the different levels of the complex learning processes which cut across
functions and interfaces. Knowledge of economics and the social sciences is thus crucially
important for organisational innovations. The need to integrate social skills and management
know-how with technological education and training only began to be widely discussed in
Germany in the early 90s (cf. Mai 1994, Weber/Seltz 1994). Human resource management
has, in contrast, been an integral part of the British system for many years. These differences
in the work and management cultures, and the resulting differences in action orientation, must
be seen as explanatory factors for the shorter implementation times of the organisational
innovation projects.
3 For a historical view of German management education cf. Kipping 1998.
- 44 -
2.2.8 Conclusions and implications Organisational innovations are associated with complex interactions and learning processes
both within and between firms. Although the firms in the two countries consider the same
organisational principles, – customer orientation, full understanding of quality, process
orientation, and decentralisation of decision making and communications structures – to be
suitable for increasing flexibility and productivity, these have very strong firm-specific
features. The decision to introduce such an innovation is the starting point for learning and
adaptation processes at different levels and dimensions of the firm. At the end of the process
the organisational innovation implemented is often different from the model planned at the
start. The organisational learning processes connected with the changes ultimately not only
define the specific details of the innovation, they also determine whether the performance
potential of the innovation can be exploited.
A valid question can now be asked with regard to innovation policy. Is it necessary to include
organisational innovations as a factor in the development strategies relating to innovation
policy at the European, national, and regional levels? Interventions in the area of innovation
and technology policies in recent decades have focussed primarily on technology and research
intensive areas of the economy and on technological innovations. In the emerging knowledge
economy, value creation and competitiveness appear to be increasingly linked with the
production of new knowledge and access to, and the reconfiguration of, knowledge from all
over the world. Thus the ability to learn and to innovate is becoming crucially important even
for the traditional industries and the so-called low and medium tech industries (cf. OECD
1996, Lundvall/Borras 1997, Lundvall/Johnson 1994, Malmberg/Maskell 1999).
The intensification of international competition in the current situation of global structural
change and the associated external pressure on firms from rapidly changing market demand
and new demands from customers require the ability both to respond to change and to be
creative. This is one of the main reasons for integrating organisational innovations with
innovation policy strategies. They make an initially ‘intangible’ contribution to increasing the
ability of firms to innovate and learn. This is apparent in dimensions other than the classical
short-term cost oriented efficiency calculations. The strategic effects of reorganisation
measures, such as increased customer satisfaction, positive effects on employee motivation,
- 45 -
and the ability to react more quickly to qualitative market changes, are only realised in the
medium to long run. The large number of realised organisational measures in this study, and
also numerous empirical case studies (cf. Andreasen/Coriat/den Hertog/ Kaplinky 1995) show
the importance of these innovations for increasing the flexibility of firms and their ability to
react and adapt.
It is now clear that an essential task for innovation policy interventions is to create awareness
of how important and relevant organisational innovations are for the firms’ ability to learn and
to innovate and also awareness of the necessarily multi-dimensional character of this kind of
innovation. They are not only linked to organisational and technological changes in structures
and processes, they also have a definite sociocultural dimension. They require major changes
in the employees’ attitudes and behaviour. Especially firms which have only limited
experience with organisational innovations tend to overlook or underestimate the importance
of the necessary sociocultural changes for the success of the innovation, as this study shows.
It cannot be assumed that companies are aware that parallel development of strategy, structure
and culture, which are mutually supportive, is required for organisational innovation projects.
Here we have an important field of action for political actors – to increase the knowledge of
the importance of sociocultural innovation on a wide basis.
This leads to a further question. What kinds of measure are usually appropriate to promote the
initiation of complex innovation processes? Without going here into action concepts, it is
nevertheless obvious that the tasks go far beyond the present forms and instruments of
technology transfer and scientific- technical collaboration. The challenge for the political
actors is to initiate the firms’ self-organising and learning processes in the area of
organisational innovations. The different innovation patterns in firms in Great Britain and
Germany indicate that the systemic conditions in which the firms are embedded the different
country-specific industrial relations and labour market regulations, the different work and
management cultures, strongly influence the collective interaction and learning processes. In
contrast to the USA, Europe has a large variety of different national and regional innovation
systems. Measures to promote organisational innovations can only be effective if they are
adapted to the particular institutional context of an innovation system. Political actors could,
for example, develop institutional leading models which can document and disseminate the
importance of values. Stimulus for organisational learning processes can proceed from this
kind of leading model in the environment of the firm. They will be able to take on orientation,
- 46 -
motivational and co-ordination functions for firms in the context of complex organisational
innovation processes, and provide support for self-organising processes.
- 47 -
2.3 Spain and Portugal (Celeste Amorim) 2.3.1 Introduction The issue of management innovations and there adoption has been empirically analysed
mainly within the most developed economies. By contrast, catching-up economies remained
largely overlooked by researchers. For these reasons this chapter explores these phenomena in
the cases of Portugal and Spain. For historical reasons both countries remained relatively
closed to internationally popular management trends, but since the 1990s a major managerial
turnaround process seems to be in place. Various efforts were made in the post-EC accession
period to spur a necessary catching-up process in both economies. In a “first catching-up
stage”, which lasted up to early 1990s, the diffusion of technological innovations were a
priority, while management innovations were largely neglected by both, political and business
domains (e.g. Ferreira, 1991, Boisot, 1993, Inácio and Weir, 1993, Simões, 1995, Buesa and
Molero, 1998, Carreras and Tafunell, 1997).
Overviews on Portuguese and Spanish management domains (e.g. Bruton, 1994, Cunha and
Marques, 1995) often refer to managerial conservatism when referring to management that is
unwilling to adopt new management concepts. It seems that the institutional arrangements of
the national systems reinforced the focus on technological reorganisation at the firm level and
this meant that the non-technical aspects, such as firm organisation, were not sufficiently
exploited. As a result, the lack of management innovation proved to be a crucial factor in the
loss of competitiveness by Iberian companies at the start of the 1990s and a critical constraint
for the necessary catching-up of both economies (Simões, 1995, Buesa and Molero, 1998).
The recognition of this fact led to an increasing attention by policy makers and within the
business sphere towards managerial aspects of firms. Within this context Iberian companies
are expected to have initiated a “second stage” in their catching-up process, this characterised
by significant changes at managerial level. Within this context, Iberian firms are expected to
have initiated a substantial catching-up process with leading European economies in the use
of a number of management innovations such as total quality management (TQM hereafter),
business process reengineering (BPR hereafter), downsizing, lean management, teamwork or
outsourcing- and some of its underlying tools and practices- which are said have became
- 48 -
widely diffused (Engwall, 1999). The extent and veracity of this assumption has not yet been
empirically investigated however. Our analysis attempts to overcome this caveat.
The increasing consulting activity suggests that consultants are playing an important role in
catching-up process. Despite developing later, the Portuguese and Spanish consulting markets
caught-up fast in the recent decade and the market structure does not seem to differ
substantially from that in other European countries. Also in these two economies governments
have put in place consultancy-based schemes as part of broader regional and national
development policies. Yet, country specificity on the supply-side still exists. As shown by
Amorim (2001), domestic consultancies for example, seem to have a more predominant role
in Spanish consultancy market, while in Portugal ICs may dominate the segment of large
firms. Thus, country effects shall also be considered in the demand-side analysis. The use and
assessment of these developments in the two markets has not yet been analysed in detail.
Hence, our analysis constitutes a starting point to evaluating current and past experiences with
consultants, and it also provides guidance for consultancy based schemes within future
regional and national policies designed to promote development.
Thus, this chapter discusses firm-specific and contextual variables surrounding the
introduction of management innovations in the Portuguese and Spanish cases, where various
efforts were made in the post-EC accession period to spur a necessary catching-up process. It
provides empirical results from a questionnaire (QIMI), which addressed the introduction of
management innovations and the integration of external knowledge in the process of
innovation. After describing the research method and data collection, the paper provides
empirical results from a survey questionnaire, the chapter first identifies the innovations
introduced and then explores if differences in firm type and geographical location affect
adoption of management innovations. In the subsequent section it investigates the use of
management consultants by firms located in the Iberian Peninsula. It also explores whether
consulting use largely depends on national or firm idiosyncrasies. The overall results enable
the development of a better understanding of the characteristics of firms and contexts in
relation to management innovation and use of consulting advice in the process.
2.3.2 Research Method and Data Collection
- 49 -
The study on the demand side of the consulting business is based on a survey questionnaire. It
was mailed in April 1999 (follow-up in June 1999) to 300 firms in Portugal and 450 in Spain.
The firms in the sample were selected randomly among the 500 largest firms in Portugal in
1997/8 (Exame Maiores Empresas 1998) and the 3,000 largest in 1997/8 in Spain (Actualidad
Economica Maiores Empresas 1998). All in all, the survey comprises 115 valid
questionnaires, 66 from Portugal and 49 from Spain, i.e. total answer rate of 15.3%, 22% and
11% for Portugal and Spain respectively.
Companies were asked to indicate from a list of alternatives which management innovations
they have introduced in the last decade. The innovations suggested correspond to the most
popular concepts and ideas that swept across the management scene over the 1980s and 1990s
(Lindvall, 1998). Total number of innovations was used as basic measure of scope of
innovation. We then investigated the innovation activity related to firm type and geographical
location. Companies were then asked which type of consultants they have used in the past,
and to rank in a scale of 1 (no impact at all) to 5 (very high impact) in which and how did they
impact in a number of management practices. Barriers for change during consulting
assignments were also evaluated using a 5-point Likert scale.
Firms were asked to evaluate to which degree internal resistance, lack of internal skills, lack
of internal motivation and involvement and problems of coordination within the project team
had been a problem for the implementation. They were finally asked to evaluate their level of
satisfaction with a number of issues related to their past consulting experience. We then
investigated the innovation activity related to firm type and geographical location. Firm type
is defined in terms of size (in number of employees /1994 and company sales in EUROS /
1998), age (number of years since its foundation in Portugal) and company business (services
(0) / manufacturing (1). Finally we also considered firm ownership (domestic (0), MNE (1))
and the local geographical context, i.e. whether the firm is located in Spain (0) or Portugal (1).
2.3.3 Number of Innovations
The results from the survey show that prominent management innovations are increasingly
relevant within the Iberia. In both countries companies made major management changes over
the 1990s, reporting an average of 7.64 management innovations out of the 14 suggested in
the questionnaire (Table 2.3.1). Compared to other studies from leading European economies,
- 50 -
the result is considerably high. In her empirical study on the diffusion of similar prominent
management innovations in Britain and Germany (summarized in this report), Strambach
found, for example, that companies had introduced an average of 4.5 management innovations
over the period 1989-1998 (Table 2.3.1). Comparatively, a catching-up process seems to be in
place in Iberia.
Similarly, the result clearly signals to the multidimensional character of management
innovation. It covers a wide range of management areas within the firm, and in the interfaces
with the environment. Innovations in quality related practices and in IT were the most
popular, with changes reported by more than 80% and 70% of the companies in both
countries respectively. Practices related to human resources management (i.e. training and
motivational practices), to supply chain management, as well as lean management and BPR
were found to be also widespread, with more than 60% of the firms using them.
Table 2.3.1 Management Innovations: total, by host country and ownership By Country Strambach’s results Total Portugal Spain MNE M S.D. M S.D M S.D M Total Innovations 7.64 2.81 7.20* 2.99 8.22* 2.47 4.3
Percentage of adopters (multiple responses allowed)
Management Innovation Total Portugal Spain UK and Germany Quality Practices 86 83 90 83 IT Systems 74 74 73 N/a Motivational Practices 69 61** 80** N/a Purchasing and Distribution processes
68 61* 78* N/a
Training Practices 66 62 71 N/a Lean Management 62 64 59 57 Reengineering 61 59 63 48 Downsizing 53 42*** 67*** 52 Team Work 53 50 57 45 Outsourcing 44 45 43 30 Business Portfolio 40 32** 51** N/a Alliances / Joint Ventures 35 27* 45* N/a Mergers and Acquisitions 30 21** 41** 25 Split up of Business Units 25 38*** 8*** 25 Notes: significant different at *** p < 0.01; ** p< 0.05; *p<0.1 Tested using t test for independent samples, and Mann-Whitney test for two group comparisons. Overall these levels of adoption per practice seem to be comparatively high, which sustains
the catching-up process argument. For example, in Newell et al. (1999) study on the diffusion
of BPR in France, Germany, Netherlands and UK, only 29% of the firms (out of 1277 firms)
indicated to have adopted BPR. Strambach more recent study has found relatively lower
- 51 -
values of adoption of adoption in Britain and UK for most of the innovations (with the
exception of M&A) (Table 2.3.1). By contrast, the less reported innovations were split-up of
business units, M&A, establishment of alliances and/or joint venture and changes in business
portfolio, with less than 35% of the firms indicating to have adopted them. Compared to the
developments in Germany and UK, our results seem to indicate that Iberian firms, especially
Portuguese, are still lagging in terms of M&A.
2.3.4 Distribution over time A clear sign of the catching-up effort is reflected from a time analysis. As shown in the table
in the Appendix and in Graph 2.3.1, the innovations were adopted largely in the 1990s.
Time distribution of management innovations
02468
10121416
<198
0
1980
-1986
1987
-1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Year
%
There is a clear concentration in late 1990s, with 55 per cent of the innovations being
introduced in the period 1995-1998. This time distribution confirms our expectations about
Portuguese and Spanish increasing awareness and interest on new management practices. If
we look in detail for the average distribution of the different management innovations in time
(cf. the Appendix), it is clear that management innovation in the firm do not only take place
sequentially. Several management innovations are sometimes introduced in parallel, which
adds complexity to the changing process. It is often the case of many innovations at once
rather than an either or. Firms link and combine different innovations, e.g. TQM and BPR, IT
and downsizing. Furthermore, innovations introduced at the same time are sometimes based
on contradictory principles, which adds to complexity related to managerial innovation.
Otherwise, there seems some rationality in the time distribution of the innovations.
Teamworking being the innovation with the earliest report (1975). Indeed, amongst the
- 52 -
suggested innovations, teamworking is one of the oldest, which has been in the management
scene for decades. The need to motivate workers, to restructure internal processes and
business portfolio seems indeed a natural follow-up from the “cutting” period. This was
dominated by lean management, downsizing, splitting-up of business units and outsourcing.
Subsequently, companies became increasingly aware for the need to look for competencies
outside the firm, leading to the growth of inter-firm agreements and collaborations. This is
reflected in the dynamism at the level of alliances and joint ventures (AJV) and M&A. More
recently, training, IT and supply chain management gained increasing attention as target areas
for adding value to the company. When we look at the most popular innovation, Quality,
catching-up is even clearer.
The analysis then considered the relationship between a number of firm structural variables,
geographical location and innovation.
2.3.5 Main characteristics of the innovators By contrast to the population-ecology predictions, large and older firms do not seem to be less
innovative, instead we found size and age significant positive correlated to number of
innovations introduced. The number of innovations is significantly positive correlated to
company size when measured both in Sales (1998 Euros) and number of employees. Both
appear positive related IT and to quality innovations, TQM in particular. Size in sales also
appears significantly positive related to outsourcing, AJV, M&A and supply chain
management, and size in n. employees to decentralisation/decentralisation of activities. Age
appears positive correlated to innovation, in particular to outsourcing (P<0.05).
Table 2.3.2 Correlation of total innovations and firm type
TOTALINO N. employees SALESEU AGE TOTALINO 1.000 0.162* 0.261*** 0.237** N. employees 0.162* 1.000 0.520 0.168* SALESEU 0.261*** 0.520*** 1.000 0.070 AGE 0.237** 0.168* 0.070 1.000 We found also significant differences across countries. As shown in Table 2.3.1 there are
significant country differences considering the average number of innovations and the
adoption of a number of individual innovations (Table 2.3.2). Spanish firms reported
significant higher number of innovations in an average than did their Portuguese counterparts.
Downsizing, purchasing and distribution practices, changes in motivational practices,
- 53 -
business portfolio, joint ventures and M&A have been significantly more reported by Spanish
firms. By contrast, “split up business units” was significantly more used by Portuguese firms.
Table 2.3.3 Management innovations by firm ownership Management Innovation MNE Domestic Average number of innovations 7.91 7.40 Quality Practices 90.6 82.3 IT Systems 81.1* 66.1* Motivational Practices 71.7 66.1 Purchasing and Distribution processes
75.5* 61.3*
Training Practices 66.0 66.1 Lean Management 64.2 58.1 Reengineering 66.0 56.5 Downsizing 67.9** 40.3** Team Work 58.5 48.4 Outsourcing 37.7 50.0 Business Portfolio 34.0 45.9 Alliances / Joint Ventures 32.1 37.1 Mergers and Acquisitions 30.2 29.0 Split up of Business Units 15.1** 33.9** No support was found for the view that MNEs use more innovative practices. MNEs
altogether (7.9) reported slightly higher average number of innovations than domestic firms
(7.4), but the difference is not significant. An analysis per type of innovation revealed few
significant higher adoptions by MNEs: downsizing, motivational practices and IT (p<0.1)
(Table 2.3.3). By contrast, the practice “split up of business units” is significantly more
popular amongst domestic firms.
In order to separate both country and ownership effects, differences between MNEs and
domestic were tested within each country (Table 2.3.4). While in Portugal MNEs adopted
higher number of innovations in an average than domestic firms (7.62 against 6.93), this is not
the case in Spain (8.19 against 8.27). However, the differences are not significant. In Portugal
significant differences exist in IT, supply chain management, downsizing, split up of business
units, and quality initiatives. In Spain there were only differences in the changes of business
portfolio, with domestic firms reporting significant higher innovations.
Table 2.3.4 Average number of innovations, by country and firm ownership Total
Portugal Spain
N M S.d N M S.d N M S.d Domestic 62 7.40 2.93 40 6.93* 3.15 22 8.27* 2.29 MNE 53 7.91 2.68 26 7.62 2.73 27 8.19 2.65 Total 115 7.63 2.81 66 7.20* 2.99 49 8.20 2.47
- 54 -
In order to eliminate the ownership effect, Spanish and Portuguese domestic firms were
compared and then the same procedure was applied for the case of MNEs. Significant
differences were found when comparing domestic firms across the two countries. The average
number of innovations is significantly higher for Spanish domestic firms (8.27 for Spain and
6.93 for Portugal). The later have also reported significant higher adoption of downsizing,
changes in business portfolio and adoption of quality innovations. Portuguese firms otherwise
reported significant higher adoption of “split of business units”. Otherwise, there were no
significant cross-country differences when comparing only MNEs. Spanish MNEs adopted
higher number of innovations in an average (8.16 for Spain and 7.62 for Portugal), but the
differences are not significant. Few significant differences emerged in motivational practices
and mergers and acquisitions, more adopted by Spanish MNEs. Finally, firm business does
not seem to have a significant impact on number of innovations. Firm business appears
positive related only to quality practices (<0.01).
A finding from this analysis therefore is that the scale of management innovation is limited to
a certain degree to firm-specific characteristics. Size and age were the most significant
variables. Country is a significant variable with Portuguese domestic firms lagging in terms of
management change when compared to their Spanish counterparts. Yet, MNEs seem to have
largely overcome country specificity. This result adds to the suggestion that they are leading
the international diffusion and homogenisation of management practices.
2.3.6 External consultants In both countries about 70% of the companies had employed consultants recently (Table
2.3.5). Thus, firms largely relied on external expertise for the complex innovation process.
Yet, the value is still below the 80% found by Strambach study in Germany and Britain.
Table 2.3.5 Type of consultants (total, by country and firm ownership) Type of consultants Total Domestic MNE
Total P S Total P S Total P S Used consultants, in percent of total 70.0 70.0 71.0 72 70 77.3 67.9 69.2 66.7 In number of firms (81) (46) (35) (45) (28) (17) (36) (18) (18) Of which (%of those using consultants) International consultancy 60.5 67.4 51.4 55.6 60.7 47.1 66.7 77.8 55.6 Domestic consultancies, of which: 52.8 48.9 57.1 40.0 39.3 41.2 67.7 61.1 73.5 Small national consultancy 33.3 28.3** 40.0** 15.6 17.9 11.8 55.6 44.4* 66.7* Large national consultancy 18.5 19.6* 17.1* 24.4 21.4 29.4 11.1 16.7 5.6 Individual consultant 19.8 19.6** 20.0** 22.2 17.9 29.4 16.7 22.2* 11.1* Academic or research institutions 12.3 8.7** 17.1** 15.6 10.7* 23.5* 8.3 5.6 11.1
- 55 -
Financial institutions 7.4 10.9*** 2.9*** 8.9 10.7* 5.9* 5.6 11.1 Professional or technical association 6.0 11.0*** *** 4.4 7.1 8.3 16.7 Public institution 4.9 4.3** 5.7** 6.7 7.1* 5.9* 2.8 5.6 Notes: *** p<0.01, **P<0.05, *p<0.1. Tested using Mann Whitney test and t test for two group comparisons. Using consultants appears significantly positive correlated to firm size measured in number of
employees (Table 2.3.6). This variable however, is statistically significant only for domestic
and Portuguese firms. There were no significant differences in the use of consultants when
controlling for company ownership and business (Mann-Whitney test for two group
comparisons and Kruskal for more than two, not reported here).
Table 2.3.6 Correlation using consultants and variables of company size Ownership Host economy
Total Domestic MNE Portugal Spain Used consultants 1.00 1.00 1.00 1.00 1.00 SALESEU -0.003 0.17 -0.16 0.13 -0.22 Number of employees (1994) 0.22** 0.26** 0.13 0.24* 0.17 *** p<0.01, **p<0.05, *p<0.1 In terms of service suppliers, about 60 per cent of the firms using consultants referred to have
employed international consultancies (ICs). However half of them also used domestic
consultancies. Within the later, small consultancies predominate, with 33% of the firms
reporting to have used their services. The use of individual consultants by all types of firms is
worth noting, while academic institutions are moderately used.
Especially after the accession of Portugal and Spain to the European Union in 1986, both
governments included development and business support organisations within its regional and
industrial development policies. These played an important role for the development of the
consultancy market. The Institute for Support of Small and Medium Manufacturing
Enterprises (IAPMEI) launched in late 1980s is a case in point. It increasingly expanded its
activities, and from simple information provider assumed an active consulting role, including
specialised offices for the creation and accompaniment of new enterprises. Other important
initiatives took place in the 1990s. We can highlight the creation of DATE for example,
launched under the PEDIP II.4 In other cases the government integrated existing organisations
to pursue its policy aims. The Portuguese Association for Quality and the Portuguese Institute
for Quality are cases in point. Largely sponsored by public funding, they assumed a leading
role on the quality movement “spiral” (Amorim, 2000a).
4 PEDIP stands for Plano Estrutural para o Desenvolvimento da Industria Portuguesa.
- 56 -
Similarly, in Spain, there was also a boom in terms of public and semi-public bodies aiming at
the promotion of R&D, the strengthening of greater communication at the European level and
the simplification of often bureaucratic management structures (Bruton, 1994). By contrast to
the Portuguese centralised system, such structures in Spain were to a large extent launched by
regional governments. The Governments of Catalonia, Madrid and Basque Country have been
particular active in this regard. Since 1981 that the SPRI, Sociedad para la promocion y
reconversion industrial, SA, launched by the Department of industry, trade and tourism of the
Basque country has been supporting the implementation of Basque Government Industrial
Policy. In the present decade particular relevance has been given to consulting for business
star-ups. It is also linked to a network of Business Innovation Centres, Industrial Promotion
Societies and local agents in the work of promoting new business. In addition to programs of
economic support the centre also offers Training. The department of industry, trade and
Tourist of Catalonia launched similar initiatives under the Linea CIDEM. Within this centre,
in the 1990s direct consulting and training is provided for firms in the process of
internationalisation (by COPCA), or for small businesses start-ups (through Catalan Small
Business Support Agency). This is linked to a network of Vivers d’empreses. By 2000 there
were about 23 of these centres for small business start-ups.
Despite these actions, there is low use PTAs and PIs. Large firms do not seem to use these
agencies to a large extent. From the results it can be assumed that these organisations may not
be in direct competition with consultancies in the large companies market,5 but they are
important competitors for those whose clients are mostly PYMES (SMEs).6 These
organisations have been important players as suppliers of basic consultancy-type competing
directly with the consulting firms, particularly in application for funds and in economic-
viability studies. In addition they stimulated the consulting business by suggesting the use of a
network of “certified” consultancies or consultants.7 As a result, there has been an increase in
consultancy work with small and medium-sized enterprises (SMEs), even in traditional and
less technically advanced sectors (Silva 1997).
5 Interview with E. Mendicutti. 6 This fact was mentioned during the interview with the Director of Portugal’s leading firm in the glass industry. The company asked the “Sociedad para el Desarrollo Industrial de Extremadura” for help in setting up their operations in Spain. 7 Some of the interviewees mentioned that their consultancies had been selected by APQ or IAPMEI as “official” consultants for small and medium enterprises in particular topics, e.g. quality, human resources.
- 57 -
Concerning firm size, ICs appear significant positive related to size variables, i.e. employees
1994 and sales, in both countries. There are also-cross country differences. On the one hand,
and by contrast to the Portuguese case, in Spain there is not hegemony of ICs. 57% of the
firms have used either small or large domestic consultancies (SMCs), against the 51% for ICs.
This result is mainly due to the high relative use of domestic consultancies by MNEs in Spain.
On the other hand, it is worth noting the significance of ARIs and PIs in Spain, and of FIs and
PTAs in Portugal. These results are in line with what we know about the role of business
schools in Spain and of professional associations in Portugal. Their use is however rather
limited.
The differences emerge due to cross-country differences between both MNEs and domestic
firms. Spanish domestic firms reported the higher use of consultancies, and there are
significant differences at the level of ARIs’, PTAs, PI and FIs. The first is more used in Spain,
while the later in Portugal. In the MNEs market country-specificity is also clear. The use of
small domestic consultancies by MNEs is significantly higher in Spain. In Portugal ICs and
individual consultants are relatively more important for MNEs. Concerning the use of
additional consultancy providers it also reflects country specificity: higher use of ARI and PI
in Spain and of FI and PTA in Portugal.
By contrast to what is often suggested, few significant differences exist between foreign-
owned and domestic firms. Furthermore, as shown in Table 6, domestic consultancies are
relative important suppliers in the market for MNEs, and apparently even more than for
domestic firms. As shown in Table 2.3.7, domestic SMCs and ICs were employed by 67% of
the foreign-owned companies. For domestic firms, 55% used international consultancies but
only 40% used domestic SMCs. The use of individual consultants by all types of firms it is
also worth noting. MNEs however reported less use of other sources such as ARIs, FI and PIs,
but higher use of PTAs. There were no significant differences when considering for firm
business. Considering international and domestic consultancies, some degree of market
segmentation might exist at the level of the practices they are involved in.
Table 2.3.7 Type of consultants used for quality innovations (%) Type of consultants
Total MNEs
Total P S Total P S Used consultants, in percent of total MNEs 53 50 57 53 54 52 In Number of firms (61) (33) (28) (30) (14) (16)
- 58 -
Of which (in percent of those using consultants) International consultancy 41.0 48.5 32.1 39.3 50.0 28.6 Domestic consultancies, of which 41.0 36.4 46.5 46.4 28.5 64.2 Small domestic consultancy 24.6 21.2 28.6 39.3 21.4 57.1 Large national consultancy 16.4 15.2 17.9 7.1 7.1 7.1 Individual consultant 14.8 15.2 14.3 14.3 21.4 0.0 Academic / research institution 6.6 3.0 10.7 7.1 0.0 14.3 Professional / technical Associations 3.3 3.0 3.6 Public Institutions 1.6 3.6
Notes: *** p<0.01, **P<0.05, *p<0.1. Tested using Mann Whitney test and t test for two group comparisons. No significant differences between MNEs and domestic firms. T test and Mann-Whitney. Our results confirm for example the strength of domestic firms on quality related innovations.
As shown in Table 2.3.7, the same percentage of clients used either international or domestic
consultancies level. In Portugal ICs still dominate but their relative weight has decreased.
Furthermore, in Spain the advantage of domestic over international has increased.
Table 2.3.8 Consultants impact by management area
Total
Management area Total Portugal Spain Domestic MNE M 4,5 M 4,5 M 4,5 M 4,5 M 4,5
Quality systems 3.42 48.1 3.33 43.5 3.53 54.3 3.40 49.9 3.45 47.2 Information technologies 3.15 46.9 3.18 52.2 3.10 40.0 3.26 51.2 3.00 41.7 Operations and processes 2.99 40.7 3.02 41.3 2.94 40.0 3.02 40.0 2.94 41.7 Strategy 2.76 34.8 2.67 34.8 2.87 37.2 3.12*** 51.2*** 2.30*** 16.7***Organisation 2.87 32.1 2.81 30.4 2.94 34.3 2.98 37.7 2.74 25.0 Human resources management 2.55 22.2 2.51 21.0 2.60 22.8 2.63 24.4 2.43 19.5 Training 2.63 22.2 2.75 22.9 2.45 20.0 2.65 20.0 2.60 25.0 Marketing / Market studies 2.21 18.5 2.33 19.6 2.04 17.2 2.45** 23.4** 1.90** 11.1** Supply chain management 2.26 14.8 2.31 15.2 2.19 14.3 2.53** 20.0** 1.90** 8.3** Finance 2.20 14.8 2.10 13.1 2.34 17.1 2.25 17.7 2.13 11.1 Business Portfolio 1.98 11.1 1.88 8.7 2.15 14.3 2.23** 20.0** 1.62** ---** Notes: *** p<0.01, **P<0.05, *p<0.1. Tested using Mann Whitney test and t test for two group comparisons Mean and percentage of firms reporting high (4) to very high (5) impact. Surveyed firms were asked about the impact from management consultants in eleven areas,
ranging from IT to market studies. It is evident from the results that consulting is a lot more
than the strategy consulting that is often mentioned in the literature. By far the highest
reported impact from consultants was at the level of quality systems and IT (46.8 and 48.1%
respectively). This is not surprising given the growth in specialised software packages
targeted at the corporate sector (e.g. SAP and BAAN), and the popularisation of quality
systems in the Iberian economies (Amorim, 2000a and 2000b). Operations and processes
(40.7%) is the next area in which consultants had high impact. This might be linked to the
- 59 -
implementation of new quality systems, which should ultimately lead to changes in company
internal procedures and routines. The significance and need for restructuring at these levels is
a recurrent theme in most surveys of Portuguese and Spanish companies performance. They
were also amongst the most reported innovations. The practices in which consultants had less
impact were those related to changes in business portfolio, finance and supply chain
management.
Ownership is an important variable explaining differentiation in terms of areas of impact. As
shown in Table 2.3.8, domestic firms reported in an average higher impact from consultants
than foreign subsidiaries. They diverge mainly in what concerns the use of consultants for
strategic issues, supply chain management, marketing and market studies, and business
portfolio. MNEs seem to use consultants to a less extent for these practices. MNEs
subsidiaries might relay on intra-firm assistance on these practices. These results suggest
consultants and internal knowledge as complementary sources of knowledge in terms of
management area. This evidence gives strength the view that MNEs subsidiaries practices are
also dependent on other sources of knowledge apart from its own parent firm. The availability
and development of such sources in host markets is thus an important variable to explain its
performance and development.
Table 2.39 Correlation per management practice and firm characteristics Firmb2 SALESEU Emp.1994 EM94CLASOrganisation -.158 -.056 .143 .189 Operations and processes -.013 .009 .059 .027 Supply chain -.201* .095 .049 .046 Human resources management -.205* .201 .115 .211 Training -.280** -.028 .113 .192 Business portfolio -.103 .026 .144 .119 Information technologies -.189 -.070 .264** .181 Quality systems -.039 -.123 -.060 -.070 Finance .004 .116 .169 .186 Strategy -.138 -.035 .175 .192 Marketing / Market studies -.036 .016 .132 .166 * Correlation is significant at the 0.05 level (2-tailed). ** Correlation is significant at the 0.01 level (2-tailed). Impact by management areas also appears related to firms business (Table 2.3.9). Service
firms reported significant higher impact from consultants, with particular relevance for supply
chain management, HRM and Training. Finance is the only area in which consultants had
highest impact for manufacturing firms. These results are in line with studies on the
consulting market which suggest service firms (financial institutions in particular) as being
behind much of the growth of the consulting business. Larger firms (in number of employees)
- 60 -
have used more consultants in IT related projects, but there are no further significant
differences. Overall cross-country comparison did not reveal significant differences either.
Therefore, company size and host economy do not seem to explain variance in areas of
impact, which gives strength to the homogenisation hypothesis, i.e. that consultants are
apparently doing the same across firms and countries.
Consultants had strong impact not only as “architects” but also at the implementation level.
By contrast, consultants` role as pure auditors, catalysts and analysts is much weak, with less
than 25% of the firms reporting that consultants had played major role on such activities
(Table 2.3.10). These results are not surprising. As general management knowledge becomes
an abundant resource, and easily accessible from alternative sources, consultants advantage
relies mainly on their capacity to adapt general ideas to specific cases by suggesting, planning
and implementing the innovations. Overall however, the impact of consultants as
implementers is lower than that of architects.
Table 2.310 Use made by clients of consultants – type of intervention Total Type of Total Portugal Spain Domestic MNE Intervention Survey question M 4,5 M 4,5 M 4,5 M 4,5 M 4,5 Catalyst Realise the need for change 2.88 25.2 2.74 22.8 2.94 28.5 2.98 40.0 2.76 30.6 Analyst Diagnosis of the initial
situation 3.10 23.0 3.28 28.7 2.70 16.3 3.05 31.1 3.16 36.1
Architects 1. Suggested changes 3.51 44.3 3.68 53.0* 3.12 32.7 3.64* 71.1 3.33* 52.8 2. Planning implementation 3.41 36.6 3.52 40.9* 3.12 30.6 3.29 48.9 3.54 55.5
“Doctor” Implementation 3.01 29.6 3.11 31.8 2.75 26.5 2.93 40.0 3.12 44.5 Auditor Assessment post-
implementation 2.83 18.3 2.82 16.7 2.72 20.4 2.73 24.4 2.94 27.8
Notes: *** p<0.01, **P<0.05, *p<0.1. Tested using Mann Whitney test and t test for two group comparisons. The limited impact at implementation level raises some doubts on consultants role on the
transfer of non-codified operational know-how, i.e. “how to” type of knowledge that cannot
be transmitted in a codified form. Previous researchers (Shapiro at al., 1993, Bennett and
Robson, 1999a and 1999b and 2000, Schein, 1999) have argued that consultants involvement
at implementation level has a high level of significance in influencing the outcome of
consulting assignments. It can be also hypothesised that in this case firms can better customise
the changes to company own characteristics, or they may even forget implementation
altogether (Schein, 1996). This issue is dealt in chapter 3.6 below with case study analysis.
- 61 -
There are significant differences when considering host economy and ownership. Portuguese
firms, both domestic and MNEs, reported higher impact than their Spanish counterparts,
especially regarding the role of consultants as “architects”. In Spain by contrast, the difference
in the mean values for “doctor” and “catalyst” are relatively smaller. These cross-country
differences are to a certain degree explained by differences in MNEs policies towards
consultants. Compared to domestic firms, foreign MNEs were significantly less affected by
consultants’ suggestions, but placed relatively more relevance to their roles as analyst,
planning implementation and as “doctors”. These differences between domestic and foreign
firms are clearer in the Portuguese case. Thus, the result suggests that especially domestic
Portuguese firms are not making the most out of consultancy use. Concerning MNEs across
countries, they show similar patterns of behaviour, supporting the idea of their relative
independence from country-specificity. There were no significant differences and correlation
when considering firms business and firm size.
Table 2.311 Client- type barriers for success Total Portugal Spain Domestic Foreign firm M % M % M % M % M % Internal resistance to change 3.25 48.4 3.09 43.0 3.47 57.0 3.27 51.1 3.23 47.2 Lack of internal skills 2.87 22.2 2.98 28.0 2.72 14.0 2.95 33.3 2.76 8.3 Lack of internal involvement 2.17 12.3 2.30 16.0 2.00 9.0 2.07 15.5 2.29 8.4 Lack of co-ordination within the project team
2.32 12.3 2.36 11.0 2.27 14.0 2.14* 13.3 2.54* 11.1
Mann-Whitney test for two group comparisons: significant at ***ρ<0.01; ** ρ<0.05; * ρ<0 A critical challenge for the firm from a management viewpoint is that of governing the
integration of the knowledge available outside its boundaries Kogut and Zander (1992). Table
2.3.11 shows that internal resistance to change is by far the most significant barrier in the
process. Nearly 50% of the firms considered it to have been a high to very high problem
during consulting assignments, followed by lack of internal skills for the implementation.
Lack of internal involvement and co-ordination within the project team were less reported.
Indeed, 33.3% and 22.2% of firms reported that these issues did not represent any problem at
all. This order of importance is similar across the distinct firm types.
There were no significant country differences. Excluding the lack of co-ordination within the
project team, domestic firms report overall higher barriers. But differences were not
significant. Firm business influence only for co-ordination within the project team, there are
no differences when considering size. This again contradicts the population-ecology
- 62 -
predictions that large firms are more difficult to change. It may be so, that they also have
more resources to allocate to large scale changing processes.
Table 2.3.12 Level of satisfaction with consultants service
Total Portugal Spain Domestic MNE M % M % M % M % M %
Skills of the external organisation 3.72 64.2 3.78 73.8 3.65 51.4 3.91** 71.1 3.49** 55.6 Cost of the service 2.78 18.5 2.78 21.7 2.78 14.3 2.73 17.8 2.85 19.5 Timing to implement suggested changes
3.32 37.1 3.39 41.3 3.23 31.4 3.29 31.1 3.35 44.5
Final result compared to the expected
3.38 42.0 3.44 47.9 3.29 34.3 3.48 44.5 3.26 38.9
No significant differences across countries, in total neither within each type ownership. Significant differences at the level of evaluation of skills of external organisation. ( p<0.010) between domestic and foreign.
As shown in Table 2.3.12 satisfaction levels with consultants’ service have a relatively wide
range, from 18.5% to 64.2%. They all fall short of the suggested English DTI targets (cf.
Bennett and Robson, 1999). However, none of the DTI targets are precisely comparable with
the measures of satisfaction assessed in this survey. An important methodological explanation
for the low values might be the fact that companies have been asked to evaluate their past
consulting experiences without making a division per type of provider. Maybe for this reason
satisfaction levels tend to be reported at a lower level. Tordoir’s (1995) study in the US for
example found that almost 60% of the firms report good to very good experiences with
outside professional services. Yet, 8% of the firms had “rather bad” experiences. In our
survey only 1.2% of the firms reported to be totally dissatisfied with consultants.
Despite criticisms on consultants “actual knowledge and skills”, the respondents classified the
skills of the consultants quite positively. This point received the highest level of satisfaction
of over 64% satisfaction. The other measures ranked low in level of satisfaction. Less than
half of the respondents were satisfied either with the result when compared to the expected, or
with the timing for the implementation. In our study about only 42% (mean 3.38, 0.75
standard deviation) of the respondents affirmed to be very to totally satisfied with results
when compared to the expected (Table 2.3.9). The result does not seem considerably good
when compared to other studies on consultants’ assessments. Tordoir (1995) study in the US
for example found that almost 60% of the firms report good to very good experiences with
outside professional services. Yet, 8% of the firms had “rather bad” experiences. In our
survey only 1.2% of the firms reported to be totally dissatisfied with consultants. Price is the
lowest ranked in satisfaction level of less than 19%.
- 63 -
Table 2.3.12 also assesses differences in satisfaction levels by firm type. The most important
conclusion to be drawn is that there are few statistically significant differences between firms
in their satisfaction levels, which suggests that the quality of consulting business is a generic
issue rather than varying between each specific type of client. Spearman’s correlation
coefficient reflects few statistically differences between firms when considering size.
However, smaller firms overall classified more positively consultants services. Larger firms
reported higher level of satisfaction with the skills of the consultants, but were more
dissatisfied at all the other measures. It is worth noting that only skills of the organisation
appears positive and significant related (Spearman’s rho 0.194, p<0.1) to class of employees
and the satisfaction with the cost of the service appears significant negative correlated to
number of employees in 1994 (Spearman’s rho -.200, p<0.1). This may suggest that
consultants were indeed more efficient at smaller firms. Due to the scale and complexity of
the operations consultants may have more difficulties at larger firms. Otherwise, smaller firms
may also have less critical approach towards externals.
Table 2.3.13 Correlation between level of satisfaction and firm characteristics SALESEU N. employees in
The plant (1994) EM94CLAS
Skills of the external organisation 0.16 0.12 0.19* Cost of the service -0.08 -0.20* -0.18 Timing to implement suggested changes -0.09 -0.11 -0.09 Final result compared to the expected -0.01 -0.02 0.04 Considering firms business, excepting for “skills of the external organisation”, manufacturing
firms appear more satisfied with consultants services. Satisfaction with “costs of the service”
and “timing to implement changes” are significantly higher for manufacturers.
Table 2.3.14 Level of satisfaction with consultants service by firm business
Services %4,5 Manufact. %4,5 Skills of the external organisation 3.90 76.2 3.64 60.5 Cost of the service 2.50* 13.6* 2.89* 22.7* Timing to implement suggested changes
3.05* 29.6* 3.42* 44.2*
Final result compared to the expected
3.35 45.0 3.41 46.3
2.3.7 Discussion and conclusion The chapter shows that, at least conceptually, several of the internationally popular
management ideas also found their way into the Iberian countries. Portuguese and Spanish
- 64 -
companies underwent major management changes over the 1990s, reflecting their efforts to
catch up with leading industrialised economies. In a context of increasing competition and
openness of both economies, such large changes seem to reflect their reaction to increasing
external pressures on companies for organisational modernisation. Similarly, firms seem to
have understood that mere “hard” technology concerns are only one aspect of the catching-up
process. To a certain degree, both countries may have initiated in a second stage of their
catching-up process. The first stage was characterised mainly by technology concerns, while
in this second stage “soft” aspects such as managerial solutions became more prominent. In
this regard, both countries industrial policies seem to have had some degree of effectiveness.
Quality innovations are a case in point (Amorim, 2000a). Over the 1990s policy-makers
increasingly stimulated and created awareness quality management innovations and these
have been indeed the most diffused.
Nonetheless, the catching-up process has just initiated, which calls for deeper attention to
organisational innovations as a factor in the development strategies relating to innovation
policy. Interventions in the area of innovation policies continue focused primarily on
technological innovations. In the emerging knowledge-based economy, and in a context of
increasing international competition, firms competitiveness and value-added seems to be
increasingly related to firms ability to reconfigure firm internal and external co-ordination and
governance forms. The advantages of such ability maybe translated in terms of internal and
external customers satisfaction, and ability to integrate knowledge from firm outside
boundaries. These are medium and long-term sustained competitiveness advantages, rather
than classical short-term oriented costs-efficiency calculations. It is thus clear that an essential
task for innovation policy interventions is to create awareness of how important and relevant
organisational innovations are, and awareness for the complex and multidimensional character
of this kind of innovation.
The results also have some implications for the homogenisation debate. Organisations to an
increasing degree appear to use similar organisational philosophies. It appears likely that this
process will lead to a standardisation of practices across countries and firms, following the so-
called isomorphism. However, caution is in order before getting at such a conclusion. There is
some evidence that those in control of organisations were constrained by firm characteristics
and national contexts. Size and age in particular were found significant variables. Size is
probably such a general measure related to several dimensions that favour management
- 65 -
innovation, e.g. total resources, greater likelihood of employing professional “gatekeepers”
who can import the latest ideas management innovations, solve problems of control.
Furthermore most of the management innovations emphasise large-scale organisational
redesign, hence are also geared more heavily towards large organisations. Furthermore, some
firm characteristics impact on the adoption of certain practices in specific. We have seen that
for the case of quality, firm business is a significant variable. Despite its increasing popularity
amongst services, manufacturing firms continue having more likelihood of adopting them.
Concerning cross-country differences, despite being significant in the overall analysis, MNEs
overcome country specificity to some extent. We did not find significant cross-country
differences between MNEs, but there were significant differences when comparing domestic
firms across countries. In this regard, we found some support for the view that MNEs are
playing a leading role on an international process of harmonisation of practices. By contrast,
domestic Portuguese firms reported the lowest levels of innovation. On the other hand, while
the least referred innovations correspond to objective discrete movements, the most reported
innovations (of which Quality Innovations is an example) are conceptually vague and open to
different interpretations (Czarniawska and Joerges, 1996, Westphal et al., 1997). Under
“labels” such as BPR or TQM firms might be using a plethora of unrelated management
practices and principles, some of which are simultaneously features of different the
management “labels”. This helps to explain firms reporting to be using several of them in
simultaneous. It is thus worth analysing “what is behind those labels?
This chapter reported one of the largest surveys of consultancy use and satisfaction in Spain
and Portugal available to date. It has also been able to compare differences across countries
and different type of users of these services. It identified a web of external relationships
between innovator firms and providers of outside expertise. Increasingly a blurring of firm
boundaries is occurring. The results further reflect not only the expansion of international
consultancies, but also the development of the domestic supply, even in the segment of large
sized and multinational companies. These results give support to Kipping, Furusten and
Gammelsaeter (1998), which pointed out that the consultancy field does not only contain the
global players. By contrast, they contradict the results from another studies, which suggest the
existence of a dual economy and market segmentation, i.e. large companies and MNEs
working mainly with international consultancies and SMEs companies working with the
domestic consultancies (Tordoir, 1995). It can be argued that this market segmentation might
- 66 -
exist but only at the level of SMEs. As proved by Bryson (1997) SMEs tend to use mainly
small and medium sized consultancies, mostly of domestic origin. Behind these general
trends, host country and firm specificity do matter.
Table 2.3.15 Summary on main explicative factors for variance Dependent Independent Use non-use consultants N.employees Type of consultants Country
Size Management practice
Management practice Ownership Business
Consultants role Country Ownership
Barriers ...... Satisfaction level Only for skills: Ownership, Size
Business
The findings suggest that client characteristics must be taken into account when analysing the
consulting business. The demand side analysis revealed that use of consultants is related to
size, suggesting that smaller firms use less external business providers then large ones. There
is therefore a need for policy intervention improvements in this regard in order to create equal
opportunities across potential users. Actions on the demand side became prominent with
programmes stimulating the use of consultancies by smaller firms and/or by those located in
less privileged regions. There are some initiatives on the supply side, based mainly on the
establishment of public lead institutions oriented to the SMEs market and located in more
peripheral areas. The survey results however did not show a significant use of public
institutions. Therefore, more emphasis should be put on the qualitative development of such
initiatives. Closely associated with this is the possibility of providing some form of training of
users in how to make use of consultants, and of consultants in how to work with different
types of clients. Similar schemes already exist, for instance in Norway and Ireland, and with
marked positive effects.
The research also found however considerable country specificity in terms of service
providers. Country specificity mediates mainly the type of agent and scale of impact by them.
In this regard, even MNEs show country patterns (e.g. type of consultants used).They suggest
a greater development of the Spanish domestic supply of management consultancy when
compared to the Portuguese one. These external sources of knowledge are driving innovations
- 67 -
in a wide range of management areas, especially in IT and quality systems. Ownership and
firm business in particular were found significant variables to explain differentiation in terms
of areas of impact.
One issue follows on from the previous discussion on how to make the best use of consultants
and it is related to the degree of involvement of consultants. Consultants’ role as “architects”
seems to be predominant over that of implementers, especially for Portuguese owned firms.
This limited involvement at the implementation level raises the potential for a decoupling
between concepts or formal adoption and actual practices, or firms may even forget
implementation all together (Amorim, 2000b). Otherwise, it further highlights the need to
develop a strategy to train managers so that they are able to make the most effective use of
external expertise. Multinational and Spanish firms seem to be a step ahead in this regard.
They put more emphasis on the implementation stage. Yet, even if the studied agents do not
get involved with the implementation of the ideas they help to diffuse, the very process of
contacting with them will force the company to reconsider its current practices which is good
for the continuing success and performance of the Portuguese and Spanish firms. Thus, the
development of the links with them provides opportunities for the transfer of management
ideas and innovations between individual companies as well as countries.
Internal resistance to change is by far the most significant barrier during consulting
assignments, followed by lack of internal skills for the implementation. There were no
significant differences considering firm type or location. These results go in line with the
evolutionary economic predictions on the path dependent change process. Seemingly they
highlight that the people element must be actively managed and failure to do so may result in
a less than successful outcome. Finally, there is the issue of quality control. From the
satisfaction analysis, the overall conclusion to be drawn is that the level of satisfaction
achieved so far by consultants is relatively disappointing (e.g. compared to the English DTI
targets). For most points, almost equal numbers of clients are very satisfied or very
dissatisfied. Clearly quality variation is high, and the results are significantly independent
from client type. Thus, variations in satisfaction might be much related to differences in
consultant quality and not differences in the type of client. This evidence raises the question
how to maintain high standards, especially within a business involving a number of active
consultants within a sector or country. As more agents get involved in the process, so the risk
increases of poor quality service and even of fraud and other dishonest practices. This is of
- 68 -
particular concern for policy initiatives involving consultants: the damage which such poor
service can inflict is not only to individual projects but also to the credibility of the whole
programme. There is thus the need for some form of quality assurance within the system, to
vet prospective suppliers of consultancy services, to monitor their performance and to
improve the long term operation of such consultancy based schemes.
Governments can act to establish acceptable standards and to restrict support for consultancy
services to those suppliers who can demonstrate capacity and integrity, for example, by
operating some form of qualification of approval process. Closely associated with this is the
possibility of providing some form of training of users in how to make use of consultants, and
of consultants in how to work with different types of clients This is of particular relevance in
Portugal, where there is any active association of consultants which could make advances at
these level. In Spain otherwise, the national association for consultancies has potential to take
the lead in this regard. This evidence highlights the need to develop a solid base of
consultancy providers.
Appendix
No. Minimum Maximum Mean Team Work 60 1975 1999 1993 Lean Management 71 1984 1999 1994 Downsizing 60 1989 1999 1994 Outsourcing 50 1989 1999 1994 Business Units 29 1989 1999 1994 Reengineering 69 1989 1999 1995 Motivational Practices 78 1985 1999 1995 Business Portfolio 45 1988 1999 1995 Alliances / Joint Ventures 39 1989 1999 1995 Mergers and Acquisitions 33 1987 1999 1995 Centra- Descentralisation of Activities
78 1990 1999 1996
Training Practices 76 1989 1999 1996 IT Systems 80 1984 1999 1996 Quality
- 69 -
3 Case Studies
3.1 The M-form in Norwegian Companies (Rolv Petter Amdam and Hallgeir Gammelsaeter) This paper presents four Norwegian cases of adoption and implementation of the M-form.
Two of the cases appear when the M-form is judged to be relatively new in the relevant
organization fields. The other two appear when the M-form is more firmly established as the
way companies organise their activities.
3.1.1 Context – the diffusion of the M-form
The M-form was developed in the US in the 1920s (Chandler, 1962) and became, according
to Oliver Williamson, ‘American capitalist’s most important single innovation of the
twentieth century’. After World War II, the M-form was introduced in several industrialised
countries (e.g. Kogut and Parkinson, 1993, 1998;Whittington and Mayer 2000) although the
timing and the extent of its spread varied from one country to another. It can, however, be
described as the most typical organisational form for large corporations in the US and Europe
in the 1970s and 1980s. This pattern of international diffusion on a wider scale makes it a
good case for studies of the globalisation of organizational models. In the United States, 50
per cent of the top hundred companies had introduced the M-form before 1960 (Fligstein
1990, table C.4). In Europe, the M-form first got foothold in the UK where more than 50 per
cent of the top hundred companies used that form in the late 1960s. The spread was slower in
France and Germany, but in the 1970s the M-form came to be the dominant organization form
among the largest industrial companies also in these countries (Whittington and Mayer,
2000).
For the Nordic countries comparable statistical data is not available, but different sources
indicate that the patterns is not dissimilar to that observed in Germany and France. In
Denmark, a survey of the 100 largest industrial companies in 1985 showed that 39 companies
were divisionalized, but when foreign companies and the agriculture industry dominated by
cooperatives were excluded 66 per cent of the remaining companies was divisionalized
(Nielsen 1987: Figure 12). In Finland, the M-form was adopted by 73 per cent of the 100
largest manufacturing firms in 1983, according to a study by Räsänen (1987). In Sweden,
- 70 -
divisionalization was introduced in the larger companies from about the mid 1960s. This is
according to the introductory statement of the book Divisionalisering och därefter
(Divisionalisation and after that) by Edgren et al. (1983) which in the lack of statistical
studies, seems to be the main secondary source on the introduction of the M-form in Swedish
business. But for one of the seven companies covered in the book (Esselte that set up a
divisionalised structure in 1964) divisionalization in the rest of the cases took place between
1970 and 1977.
In Norway, the shipbuilding company Aker Mek. Verk, the chemical company Norsk Hydro,
and the electro-chemical company, Elkem all introduced the M-form in the mid 1960s. Some
other large companies, like the aluminium company Årdal og Sunndal Verk followed in the
mid-1970s. But it was not until the mid-1980s that the M-form really began to dominate
among the largest companies. In the 1980s industrial companies like Nycomed, NEBB, STK,
and Selvaagbygg divisionalized. At the same time the largest banks, like Kreditkassen, and
insurance companies, like UNI-Storebrand, introduced the divisonalized model. The M-form
also spread to state own organisations, like the Norwegian Post Office (Amdam 1999;
Gammelsæter 1991; Myrvang 1997).
Altogether, the data on the Nordic countries quite clearly indicates that the M-form was
institutionalized as a template in this part of Europe during the 1970-80s. Since there is no
reason to believe that the M-form has yet become de-institutionalised, although this can be
argued for the often accompanying diversification strategy and the conglomerate (Davis et al.
1994), this also means that for two of the cases presented in this paper (Hafslund and
Glamox) the introduction and implementation of the form has taken place in a periode when
the M-form can be conceived of as an institutionalised template, whereas the two other
companies, Aker and Norsk Hydro, started to divisionalize long before this periode, namely
early in the 1960s.
3.1.2 The four cases
3.1.2.1 Norsk Hydro Formally, Norsk Hydro decided to divisionalize the company in 1964 (Gammelsæter 1994;
Rønning 1997). Norsk Hydro was at that time the largest industrial company in Norway with
9,500 employees, all of them in Norway. At that time, the production of fertilizers, which had
- 71 -
been the company’s main product from its foundation in 1905, was dominating with
approximately 70 per cent of the turnover value, and it had several production units in
Norway (see Table 1). However, Hydro had to some extent begun to diversify in the mid-
1960s. During the 1950s the company had differsified into producing other chemicals.
Already in the late 1940s the company had decided to go into the production of metal
(magnesium), and in 1963 it was decided to extend this activity into the production of
aluminium (Eliassen and Strøm 1989). In 1963 the company also decided to participate in a
joint-venture to search for oil in the North Sea (Løland 1997).
We could argue that these obeservations support the idea that internal organizational pressure
(diversification) or external institutional pressure (the fact that some international key actors
in the chemical industry had introduced the M-form) may explain the decision to divisionalize
Hydro. However, this arguments is based on a functional view, claming that there is a
correlation in time. We will argue for the need to go beyond the functional level and
investigate the concrete decision process that took place. If we do that, we will see that the
Hydro case shows a very strong elements of searching for new organizational models as well
as elements of changing the model. If we look closer at what went on inside Hydro, we see
that the decision to divisionalize was a result of a searching process for a new organisational
model. From the early 1950s, several committees were appointed within Hydro in order to
make organizational changes. One of them led to the establishment of the HRM department in
1953 (Moseide 1999). In 1958 a committee led by the secretary of the board, Hugo Berentzen,
noticed that Hydro`s structure was very centralized. As a result of this work Hydro set up
three permanent committees, one for each of the company’s main businesses; fertilizers,
magnesium, and plastics. These worked across the strong functional departments that
dominated Hydro. Even though the concept ’division’ was not mentioned in the debate, and
the new committees did not have any strong or independent position, they represented a
forerunner to the divisionalized company.
In February 1962 a new organizational committee was appointed. It was this committee that
one and a half years later suggested to adopt the M-form. The purpose of the committee was
to suggest changes in how the headquarters should be organized, and especially consider
whether several tasks should be decentralized. The committee started to search for ideas of
how to organize. As a first step, three Norwegian companies were visited, namely Aker and
the mechanical companies Kværner and Christiania Spigerverk, but the committee did not
- 72 -
find any new ideas, it reported. The next step was to visit some larger Swedish chemicals and
mechanical companies. At that time neither of these Swedish companies had divisionalized,
and the visits did not seem to have had any impact on the committee. The third step was to
visit nine chemical companies in the US, among which seven were listed at Fortune’s top 500.
The committee noticed that seven out of nine companies had introduced the M-form. It was
the meetings with these companies that made the committee suggest that Hydro should
divisionalize.
This process was a real searching process. When the process started, management did not
have any clear idea on which organizational form to chose. We should also add that there
were no consulting firm pushing – or advising – Hydro to divisionalize. It was first after the
decision was made, that management called upon a couple of consultant firms to help the
company implement the new organizational form. At Hydro, there were some changes among
managers below the CEO prior to the decision to divisionalise. The General Manager, Rolf
Østby, was appointed in 1956, and he had this position till 1966. However, in the first four
years of the 1960s, several other members of the internal board were appointed. One of them
was Johan B. Holte, who in 1960 was appointed the director of R&D and in 1966 became the
company’s new General Manager. Another was Rolv Heggenhougen, who was appointed the
technical director. Fredrik Sejersted was appointed director of legal affairs, and Reidar Tank-
Nielsen the new HRM director. Odd Narud was appointed the director of finance, and Ulf
Paust the marketing director. It could be argued that the decision to introduce the M-form was
an expression of a generation shift within the company’s excecutive management.
What is striking about the Hydro case is that the decision to introduce the M-form was
primarily an on-the-paper-decision. Initially, the M-form was only partially adopted, since it
was only the magnesium activities that were divisionalized in 1964. The other businesses
remained within a functional structure. One year after the magnesium division was
established, the other parts of the activities were reorganized into one plastics and one
fertilizer division. However, we will argue that this also was mostly on-the-paper. Even
though Hydro formally divisionalized, the old functional organization was not dissolved. The
divisions were thinly equipped with their own staffs, and consequently very dependent on the
still strong functional departments. As a matter of fact the decentralization of decisional
power, and the division between strategic and operational decisions, first took place in the late
1970s after Hydro had established divisions for oil and aluminium production respectively.
- 73 -
3.1.2.2 Aker Aker also decided to divisionalize in the mid-1960s. The shipbuilding company Aker Mek.
Verksted had from the mid-1950s expanded rapidly by acquiring several independent
shipyards both at the east and west coast of Norway. The expansion meant that the company
extended its production line from building what could be described as tailor-made liners to
also building standardized oil tankers. It also diversified into the production of ship motors. In
1964 management decided to participate in the search for oil, and in 1965 the company
invested in electronics. During this period of expansion and diversification the staff function
at the head quarter level expanded both in activities and number of employees. When the
company in 1965 bought the second largest shipbuilding company in Norway, Bergens Mek.
Verksteder (BMV),8 the central administration was not able to handle the organization
anymore. According to the historian Håkon With Andersen, merging BMV with Akers Mek.
Verksted, would tear the existing centralized organisation apart. Therefore, management
decided to divisionalize (Andersen 1989:379).
There are several similarities between the Hydro and the Aker case. In both companies the
decision to divisionalize came after a period of diversification, and the organizational change
could be seen as an expression of a new generation of managers’ interest to define a new
organizational platform for their activities. In the beginning of the 1950s all four members of
the board of directors were appointed directors before the Second World War. When the
1960s began, the typical top manager of the firm was engineers in their forties that was
appointed some times in the 1950s. The CEO was Martin Siem. He was appointed CEO in
1958 after having been technical director for four years and vice-CEO for another four.
Martin Siem was personally strongly involved in promoting organizational changes. Like in
Hydro management began to search for new organizational models to replace the strongly
functional and hierarchical organization with limited use of external help. The process started
in the 1950s when Siem strengthen the production planning department and also established a
HRM department. In a way, this process strengthened the functional aspect of the
organizations since it resulted in an increase in the size of the headquarters. When Siem took
over as CEO in 1958 he redfined the task of the staffs. The size of the staffs increased from
8 The numbers of employees was approx. 8200 at Akers Mek. Verk and 3.100 at Bergens Mek. Verksted (Norges 500 største bedrifter,1968)
- 74 -
152 in 1960 to 346 in 1965 when Aker decided to divisionalised. We may say that Siem in
1958 tried to solve the organizational challenges created by diversification and acquisitions by
creating a more strictly defined functional organization.
In 1965, however, when Aker bought BMV, management realized that it was no longer
possible to continue the policy of centralizing power as the company expanded and became
more complex. The decision to establish three divisions could be interpreted as a dramatic
change compared to the tendency of centralism in the early 1960s. This interpretation is
however modified by the fact that Siem in several speeches from the late 1950s explicitly
defended a stronger decentralization and delegation of power in companies. This
contradiction between speech and practice could be explained as an expression of Siem’s lack
of knowledge about alternatives to the functional form. Another modification is that the
changes in practice were much less radical than what they looked like on the paper. Even
though the company introduced the practice that each division should have their own staffs,
management seemed to have problems in believing one hundred percent on the M-form as an
ideal. Actually, after a couple of years Aker reintroduced the functional organizational form.
3.1.2.3 Hafslund Hafslund divizionalized in 1982-83. Throughout its history this company had been producing
and distributing electric power, engineering power stations and operating a small smelting
plant. In the 1960s the number of employees averaged 750, but in 1981, when
divisionalization was under way, the number of employees had fallen to just over 600, largely
due to the adoption of new computer technology in power stations. Neither was it strategic
diversification that led to introduction of the M-form. The company was searching for
business alternatives, however, and a few years after the reorganization it acquired a
conglomerate unrelated to Power's previous businesses. This acquisition increased the number
of employees to about 2,000 in 1986 (Gammelsæter, 1991).
The introduction of the M-form was the outcome of a political process that had started in the
mid-1970s. At that time a process had begun whereby retiring managers were being replaced
mainly by external recruits. The company was still led by a tier of managers who had spent
most of their working careers (three decades on average) in Power, and it was characterized
by stable markets, a centralized structure and an authoritarian leadership style. New middle
- 75 -
managers joining the company found the organization structure and managerial style old-
fashioned and restrictive, and some was indeed well acquainted to the operation of the M-
form. Criticism and proposals for change was expressed as the part of a formal strategic
planning process taking place in 1976-1977. But the gauntlet thrown down was not picked up
by the top managers.
In early 1979 similar criticism was voiced again, and the executive management agreed to set
up a committee to analyse the situation and to suggest organizational changes in the electric
energy sector. The company was facing greater uncertainty in this sector, related to changes in
government regulations. These had been known for three years, however, so the company’s
response was not rapid. The committee consisted of middle managers only. As well as
suggesting that the company's energy business be organized as a semi-autonomous division,
the committee went beyond its mandate and suggested that the entire company should be
reorganized along divisionalized lines. When the proposal that was put forward in late 1980
gained the support of the executive management, an important explanation can be found in the
changes in the executive team itself. The former general manager had retired, and the
youngest of the team of four that had been in charge of the company during the 1970s had
succeeded him. The introduction of the M-form can be seen as the outcome of the struggle
between older top managers and younger middle managers over the organization structure.
The Engineering Manager, the most prominent representative of the engineering profession in
the company, was certainly not too happy about the reform. Indeed, one implication of the
change was that the Engineering Department would be split up and that its traditional
hegemony would be undermined.
During 1983 several divisions were set up in Hafslund. The traditional businesses, the power
production and the smelting plant, were both organized as separate divisions and gradually
equipped with their own accounting and personnel staffs. Parts of the engineering department
were organized as a Power engineering division and even a Finance division was established.
The transition to the new organization form was seemingly quick, but deviations from the
template was made. For instance, the Engineering manager kept his formal position as leader
of a functional department at HQ, and the division managers at Power production and Power
engineering was formally reporting to him, not to the General manager. Interestingly, this was
not displayed in the organization chart, and although the arrangement annoyed the division
managers it lasted until the Engineering Manager retired three years after the reorganization.
- 76 -
There is reason to believe that the special arrangement derived from the historically close
relationship between the General manager and the Engineering manager. Division managers
also complained that in reality the divisions did not get their autonomy in important matters
like the negotiation of wages and the operations of the plants. The involvement of the General
manager was closer than the division managers expected, and these conflicts exposed
different translations of how the M-form should be operated in practical life.
In 1985 Hafslund acquired a divisionalized multi-business firm that was larger than Hafslund.
Hafslund had established a relationship with McKinsey already in 1982 and the consultants’
analysis and advice on corporate strategy included both the investment of capital in new
businesses and the adoption of a holding company type of the M-form [Clark, 1999: 158].
Although the old businesses were not immediately turned into subsidiaries in legal terms,
boards were set up for each division already in 1984. And following the aquisition in 1985,
Hafslund soon found itself operating both divisions with their own boards and subsidiaries
organized as limited companies. It may not come as a surprise that McKinsey assisted
Hafslund in the merger process. Within very few years (1983-1986) Hafslund was
transformed from being a very conservative functional company in which the executive
managers involved themselves in detailed matters, to a divisionalised conglomerate that
largely decentralized decisions to divisions or subsidiaries.
Whereas this transformation can be traced back to the strategic planning process and the
initiatives of middle managers in the last half of the 1970s, it is also interesting to note that the
General manager in this period was the youngest of the quartet of executives that denied even
the slightest development in this direction in the 1970s. With the gradual dissolution of this
long-tenured team, the General manager used his new won power to embark on what he
perceived as the modernization of the company. However, in some respect he ends up in a
role reminiscent to the last Soviet leader Gorbatchov who also emerged from the
nomenclatura: He started a revolution that he in the end was unable to control. While in the
first two years there was clear indication that his translation and implementation of the M-
form was heavily influenced by his embeddedness in the old regime, the acquisition of the
larger multi-business company brought in not only McKinsey, again, but also changes in the
board and in executive positions. From the old Hafslund management there was now none left
but some of the critics of the executive team ten years earlier. In the clear light of hindsight, it
looks like the natural order of things when the General manager had to step aside in 1987.
- 77 -
3.1.2.4 Glamox Glamox divisionalized and re-divisionalized in the period 1997-2000. The company was
established in 1946, based on the invention of a chemical process applied to the treatment of
lighting reflectors. Later it started production of electric heaters and also acquired national
competitors within this business. By 1990 the company employed about 1000 people, a
number that increased to about 1300 in 2000. Until 1992 Glamox was a functionally
organized company based on the operation of a domestic plant complex but also several sales
and production subsidiaries mostly in Northern Europe.
In 1992, following the take-over of a new general manager, a new structure was established
according to the idea that the separation between production and sales companies be
cultivated and the relations between them be determined by the logic of internal market. This
meant that most activities were organized in either production or sales companies (wholly
owned limited companies) respectively. These were depicted as customers selling and
purchasing products and services to and from each other, in contrast to the past when the
transactions between the mother and the daughter companies were not systematically
invoiced. Another idea behind the new structure was to separate more clearly between
strategic and operational management. Therefore a group management was organized as a
separate owner company. The group management was functionally organized (Marketing,
Finance, Technical, and Business Development Directors) under the Managing Director.
Gradually the areas of responsibility of the group directors became market based. Through
1996 two sales and marketing directors supervised Europe and Scandinavia respectively,
while the responsibilities for three production directors were organized according to product
markets. Interestingly, four principles were now blended in the design of the overall structure:
1) the formal separation between strategic and operational management, 2) the separation of
sales and production, 3) the geographical markets separation, and 4) the product markets
separation. But for the separation of sales and production these principles are all well known
in M-form companies. In 1997 there was a formal divisionalization in the sense that three
product-markets were designed and divisional responsibilities allocated to former group
directors. There was no elimination of the divide between production and sales companies,
- 78 -
but merely an allocation of the separate companies to the now Heating division, Lighting
division and Marine/offshore division respectively.
Due to controversies concerning strategy in the executive management, the executive team
dissolved in the autumn of 1997 and a new management was installed. A former McKinsey
consultant and IBM executive was recruited as general manager. The new management took
steps to revitalize the company and in some way reversed the development in organization
structure. An intensive strategic process resulted in efforts at re-engineering the value chain,
which included the centralization and integration of all IT and logistics resources in order to
implement one company-wide computer system, and also a restructuring and cultivation of
business segments and production lines across subsidiaries. In terms of overall structure two
market/sales divisions (Heating and Marine/Offshore) and a Production and Supply division
was created in 1998 and later, in 1999, a process oriented matrix structure based on both
functional and market principles was created while the group management was again
functionally organized. In 2000 the M-form was re-installed with two product-market
divisions after the sale of the heating business in 1999. The former legal company status of
the sales and production subsidiaries was abolished and all companies integrated in either of
the divisions. Thus the principle of clearly separating sales and production - a cornerstone in
most of the structures in 1990s - was forcefully rejected. Compared to the previous divisional
structure, the divisions were now organized with their own staffs, whereas several functions
was still retained at corporate level, included the value chain management.
In terms of business strategy Glamox did not diversify in the course of the 1990s. However,
lighting products for marine and offshore installations increased in importance relative to the
onshore market where Glamox run into trouble. At the start of the decade the offshore market
was small compared to the onshore market, but at the end of the decade the turnover of the
marine/offshore business equalled that of the land lighting business. Nevertheless, although
the turnover of the company increased almost year by year, in terms of profit the upturns
hardly levelled the downturns. At the largest production site the production of heating and
lighting products for both on- and offshore markets was more or less integrated. Historically
the idea of getting synergies from the different product lines and levelling vacillations in the
different seasonal markets were an important idea. On the one hand, this made it difficult to
cultivate the product market principle on the floor level. One the other the separation between
sales and production companies had caused almost insurmountable problems connected to the
- 79 -
negotiating of inter company prices. Although the companies were interdependent within the
same value chain, they behaved more as competitors in a market than allies integrated within
a corporation. Irrespective of the external markets, their results also depended heavily on the
prices that could be obtained between them and consequently much energy was put into price
negotiations. Thus, the gradual development towards product divisions can be understood in
the light of the need for tighter integration of the companies and the activities in the value
chain.
Inside the company the suspension of the M-form structure in the late 1990s is explained
firstly by the need for re-engineering the value chain, including the integration of sales and
production, and secondly by the need to separate but still cultivate the value chains within
each product-market segments. This was first accomplished for the heating business which
was subsequently sold out because it was defined secondary in both prospects and focus. In
the remaining businesses the processes are more intertwined, and although great progress has
been made there is presently still work to do in terms of separating and purifying the value
chains. Whereas the aim of the re-engineering process has been to create more efficient
businesses, the process has also given birth to an ambition to find separate industrial partners
for each division since the specific combination of the marine/offshore and the land lighting is
unique to Glamox and hardly of strategic interest to possible partners. This also drives the
process towards a more clear-cut separation between the divisions.
3.1.3 Discussion
With reference to the descriptions on the spread of the M-form in Europe and in particular in
the Nordic countries, it can be argued that both Hydro and Aker were in the forefront of
introducing M-form ideas at least in the Nordic countries. It is obvious that both these
companies had to search actively for alternatives to the structures they already operated. This
indicates that the M-form was not very institutionalized at the time, although Hydro found the
form to be common in the US chemical industry. At home ground it was hardly experienced
by anyone.
It is also quite obvious that the processes experienced in Hydro and Aker was far from a full-
fledged adoption process in which the M-form as template was implemented quickly and with
radical changes in both management and operations. On the contrary the approach of the
- 80 -
management in both companies was marked with caution. This can be read as a lack of
experience with the form as well as hardly any references from the domestic and Nordic
industrial environment. Despite the fact that both companies also experienced important
changes in their management in the periods previous to the structural changes, the changes
were less radical than might be expected. In many ways the changes were more on paper than
in practice, indicating what might be translated as de-coupling processes. Because both these
companies were experiencing organizational problems before they were aware of the M-form,
let alone the lack of awareness of the form in their business environments, it is problematic to
argue that their introduction of the template and the obvious discrepancy between practice and
the template as it is generally taught (the management in Hydro at least was aware that the
practice of the US companies were much more radical than their own) was a result of a
strategy to show their stakeholders that they were modern whereas operations were kept apart.
In the same vein, the data do not support the idea that the processes were translational in the
sense that the companies were searching for identities that were both modern and unique at
the same time. This is logical, however, since the M-form was not institutionalized in their
environments and as such probably did not represent a very obvious token of modernity. What
is more sensible is to understand the way the form were put into practice as a process of
translation in which the new ideal was translated through the lenses of the old functional form
which was still the platform of the managers controlling the reforms. Although the managers
that decided to introduce the new ideas were quite new in their positions and as such not
responsible for the old structures, they were also generally internally recruited and in many
ways brought up as managers within these structures. Since there were also few if any role
models it was probably natural to be cautious and advocate an incremental change strategy. It
is also noteworthy that the prominent positions these managers held were functional, and to
advocate a radical devolution of responsibilities and tasks to operational units could mean
undermining their own positions. Thus, it can be suggested that the kind of translation that
was in operation was as much political as it was purely cognitive, and the type of modelling
involved more readily be characterised as incremental adaptation rather than transformational.
Although the structures that were being operated in Hydro obviously were hybrids, the
direction of development over the years was towards implementation of the more
decentralized ideas of the template (Gammelsæter 1991). In Aker, the direction was the
opposite, with a return to the functional form.
- 81 -
In contrast to the processes of divisionalization in Hydro and Aker, the M-form was well
known and fairly institutionalized in the relatively small Norwegian business milieu when
Hafslund and Glamox formally divisionlized. In Hafslund, the struggle for greater freedom
from detailed executive supervision brought middle managers to discuss alternative
organization structures, and it was observed that other companies operated divisionalized
structures at least around the middle of the 1970s (Gammelsæter 1991). The instance of de-
coupling took place in 1983-84 when the Engineering department was omitted from the
organization chart although two divisions was reporting to its leader can also be taken as
evidence of the institutionalization of the M-form at the time. In the light of the modernization
motive of the General manager, this deliberate omission indicates an awareness of how the
company should display its structure. At the turn of the century the interesting question is
perhaps whether the M-form has not become de-institutionalized. At present we have no
indication that it has. On the contrary, the form seems to spread further as it has in the last
decade been propagated in the former eastern economies [Clark, 1999: 158].
If we accept the premise that both Hafslund and Glamox operated in environments in which
the M-form was well institutionalized, we still have to question the idea that organizations
adopt organizations forms in the sense that a complete template is taken for granted and
organizations - at least the managerial structure - subsequently are designed after the template.
What we witness in both these companies is that the formal introduction of the M-form has a
fairly long prehistory. In Hafslund important actors in the middle tiers of management are
prepared for this change many years before it happens, and when divisions are introduced it is
the General manager and his care for old fellows that slows the pace of the transition, not
managers at lower levels. This is also what caused the short period of obvious de-coupling
that took place in Hafslund. Compared to the divisionalization in Aker and Norsk Hydro the
transition from the old to the new is certainly more rapid, but to conceive of it as a quick
adoption process seems misplaced. After all, the period from 1977 when the formal strategic
planning process began and the idea of decentralizing power from HQ to operational units
first was formulated in writing, till 1984-5 when boards were set up for the divisions and the
Engineering Director retired, is quite long.
Similarly, in Glamox important principles underlying the M-form was introduced already in
1992 - foremost the idea of separating accountable business units from a strategic level - even
though they were mixed up with the idea of separating sales and production units. Some years
- 82 -
later the product-market idea in particular was given higher priority in organizing the group
management, and the image of divisionalization was becoming more distinct. It is noteworthy
still that the general manager that introduced the separation between sales and production
companies never rejected this principle, but instead tried to combine it with principles of the
M-form. This can be conceptualised as a translation process in which modelling is modified
and uniqueness is preserved or an incremental process in which management find it hard to let
go of principles that have been fundamental to their regime and therefore their authority.
We do not know whether the purification of the M-form in Glamox depended on the change
of management, but whereas the re-engineering of the value chains was not regarded a
prerequisite for establishing a divisionalized structure by the former management, this was
exactly the motive for the reversion of the process made by the new management. The
intermezzo of suspension of the divisional structure most likely must be understood as a
symbolic break connected to the use of another template, the Business Process Reengineering
that forcefully advocates ’starting over’ (Hammer and Champy 1993) as a basic principle in
radical organization change. Thus the formal re-introduction of the M-form in 2000 can better
be understood as the ’end’ of a process of divisionalization rather than the ’start’ of it. In
particular, there is reason to believe that its implementation was made easier by its prehistory
in the company and not to forget the elimination of the principle that many middle managers
found most improper, namely the separation and competition between production and sales
companies.
Despite the dissimilarities of the divisionalization processes in Hafslund Glamox, describing
both as processes of adapting to the idea of the M-form catches the events more succinctly
than does the term adoption. At least in these companies this also rules out the understanding
of modelling as de-coupling as a permanent change strategy. Given the high
institutionalization of the M-form in the 1980s and 1990s this is noteworthy. Having said this,
the de-coupling mechanism appears to operate in Hafslund as a device for smoothing the pain
of transition for long-tenured managers while at the same time demonstrating the modernity
of the company. In this company at least it did not work long, and the only reason it was
accepted by division managers was probably the certainty that is was provisional. In this sense
it can hardly be interpreted as a process of translation either. The deviation between the
organization chart and what was actually practiced was deliberate, and together with the
expressed displeasure with the arrangement on the part of the division managers, it is difficult
- 83 -
to understand the instance as a purely translational process in which the company tries to
carve out a new identity that is at the same time both unique and modern.
3.1.4 Conclusions
We have briefly described the introduction and implementation of the M-form in four
Norwegian manufacturing companies; two of the forerunners and two late ’adopters’. The
divisionalization processes are seen in the light of recent theoretical approaches to the
diffusion of management technologies and the concomitant inferences that can be made on the
relevance for implementation processes in organizations.
The understanding that can be derived for the cases is first that organizations do not adopt but
adapt to ideas and templates. This is hardly a controversial conclusion, but it points in the
direction that what we have to study more is the process of adaptation which can be
understood as the use of both de-coupling mechanisms and translational mechanisms that are
cognitively and/or politically informed and possibly giving different patterns of development
in different organizations. At this stage we would suggest that adaptation involves both de-
coupling and forms of translation, but the case of the M-form also suggest that in spite of the
local transformations and designs that are arrived at in specific organization at different times
there is a remarkable cohesion to the template which the companies that we study either
conform to (over time) or alternatively reject altogether (cf. Aker).
This makes us think of the adaptation process as a relatively long iterative translation process
(even in companies that model their structure from a template that is very institutionalized) in
the sense that managers both adjust their organization structure to the template and
simultaneously translate the template according to their own situation, including their
relations to colleagues. Such processes can include the use of de-coupling mechanisms as a
deliberate device and will almost necessarily lead to local designs that at times can be
presented as or conceived of as unique to the organization in question, as was the case in
Glamox for instance. However, since there are many trivial and non-trivial mechanisms that
change the composition of management in organizations, now and then instances occur in
which the relation between the template and the actual structure is reinterpreted, or
understandings that has been arrived at an earlier point can be put into practice. This in
particular can be connected to shifts in management, if not exclusively so.
- 84 -
One of the main merits of this study is the comparison of divisionalization processes in
companies that introduced the form at quite different points at what might be seen as a
institutionalization cycle. We will generally recommending this approach also in the study
other templates or ideas of management technology, not the least because the analysis made
here is based on the implementation on the M-form which is a template that possibly is
different from many other modern templates or more loosely connected ideas on the
management of organizations.
- 85 -
3.2 Organizational change in Dutch banking (Doreen Arnoldus and Joost Dankers) 3.2.1 Introduction In this chapter, we present the results of case-based research on the role of consultancies in
organisational change in the Dutch banking sector in the second half of the twentieth century.9
The banking sector of the Netherlands is an interesting economic sector for analysing the role
of consultancies as carriers of management knowledge, because of its large size compared to
the country’s GDP and its high degree of internationalisation. In addition, the Dutch banking
sector consists of banks from a wide variety of origins. We have used this variety in our
selection of the cases. The choice of the case studies is based on the proposition that the role
of consultants is dependent on the organisational structure of the client. We therefore selected
different types of banks - both in terms of ownership and organisational structure and with
respect to market orientation. We selected commercial banks, which were limited companies,
agricultural banks, which were co-operations, and savings banks which were organised in a
federative organisation. This selection enabled us to compare the interaction between
consultant and client and to evaluate the influence of the organisational structure of the client
banks.
In the late 1950s the formerly specialised Dutch banks started to diversify their services. This
led to a fierce competition in the banking sector, which in its turn stimulated many bank
mergers in the period 1964-1975. Until now historical research has overlooked the role that
consultancies played in the transformation process in the Dutch banking sector following this
merger wave. This neglect was probably due to the fact that consultancies generally only
came in after the decision to merge. It was in the post-merger integration phase, however, that
consultancies had the chance to put their mark on the eventual outcome and success of the
mergers.
We will first give an overview of the developments in the banking sector and in the consulting
industry in the Netherlands from 1950 to 1990. Next, we will present the case studies that
9 This chapter is based on original research carried out in the archives of the banks studied. For the detailed references see Sluyterman et al. (1998), Arnoldus (2000) and Dankers et al. (2001). Research was partially funded by the CEMP project. The authors are grateful for this support and would also like to thank Ton de Graaf and Stefan de Boer, corporate historians of ABN AMRO Bank and Rabobank, and Jos van der Linden, Angela van Son, and Jozef Vos from the University of Utrecht. The usual disclaimer applies.
- 86 -
were pursued in three banking categories: commercial banks (Amro Bank, ABN Bank, and
their joint successor ABN AMRO), agricultural co-operative banks (Rabobank and their
predecessors Raiffeisenbank and Boerenleenbank) and municipal savings banks which
ultimately integrated into two conglomerates (VSB and SNS). As we will argue in this paper,
these differences had implications for the manner the banks dealt with the services of
management consultants. Using the (secret) minutes of the meetings of the Managing Boards
in the period 1950-1990 and the correspondence between the banks’ management and the
consultancies, as well as reports and other documents concerning the consulting assignments,
we were able to reconstruct the interaction between consultants and clients, as well as analyse
how different levels within the banks perceived the contributions of the consultants.
3.2.2 Background I: The Dutch banking sector, 1950-1990
In the beginning of the period the boundaries between the different types of banks were well
defined. The commercial banks, the co-operative banks and the savings banks each provided
their own market segments. The four big commercial banks provided short-term loans to trade
and industry; the many rural credit co-operative banks focused on the provision of medium-
and long-term credits to the agricultural sector; and the numerous savings banks aimed at the
local nickel-and-dime savers. Other market segments such as the small and medium-sized
businesses and the housing market were catered for by Nederlandsche Middenstandsbank
(NMB) and several independent mortgage banks respectively. Around 1990 all these types of
banks had converged in terms of the banking services they supplied and the wide range of
customers; most banks had become general banks that aimed at both the retail and wholesale
markets. However, for the banks under study we will use the labels commercial, co-operative
and savings banks for the entire period because even though the banks’ services converged,
their organisational structure and market orientation remained distinct.
The transformation of the Dutch banks from a highly segmented market to a market in which
all banks were direct competitors started in the late 1950s when the commercial banks
changed their credit policy in response to the increasing demand for investment and export
credit of Dutch enterprises. The commercial banks started to provide medium- and long-term
credits. To fund this increased lending they attempted to tap the swelling reservoir of private
savings that were another result of the prosperity of the late 1950s and 1960s. Apart from
very wealthy clients, private customers had never belonged to the commercial banks’ clientele
- 87 -
because private savers traditionally kept their savings at the co-operative banks,
Rijkspostspaarbank (the postal savings bank) or, of course, the savings banks.
Tapping household savings thus required specific investments of the commercial banks. The
new consumers market was approached aggressively; to attract clients from the middle and
lower classes higher interest rates at savings accounts were offered as well as other services
such as consumer credits. In addition, the commercial banks had to invest in branch networks.
In this way retail banking gradually became a new core activity of the commercial banks; a
goal in itself rather than a mere method to attract funds. The expansion of the commercial
banks - commercially as well as geographically - brought these banks in direct competition
with co-operative and savings banks that traditionally had a strong local presence in the
country-side and aimed at the non-rich private customers. The savings banks were naturally
most affected by the entrance of the commercial banks in their sheltered niche market. The
co-operative banks, however, were also disturbed because savings were their only source for
the credit provision. Consequently these two types of banks expanded their banking services
into retail banking as well.
The diversification of the formerly specialised Dutch banks led to a fierce competition, which
in turn stimulated many bank mergers in the period 1964-1975. It is remarkable that this
process of concentration took place within the traditional categories of commercial, co-
operative and savings banks. This shows that in spite of the fact that all banks were
developing towards general banks, the organisations were still worlds apart.
3.2.3 Background II: Management consulting in the Netherlands
Before the Second World War Dutch consultants - ‘efficiency engineers’ as they called
themselves - primarily focused on issues such as rationalisation, efficiency, and time and
motion studies. The economic policy of the post-war reconstruction, the ‘controlled wage
policy’ of the 1950s boosted the further development of consultants. In order to increase
competitiveness the Dutch government wanted to avoid sudden increases in wages. Individual
companies could only get permission for an increase in wages if this was constructed in a
tariff system based on merit rewarding. Hence there was a great demand for consultants who
could perform time and motion studies to determine the norms for rates of pay. In the
gradually tightening labour market consultants were used to prove that labour productivity in
- 88 -
a particular firm was relatively high which could legitimize breaking through the norms of the
controlled wage policy. Such assignments were therefore called ‘breaking-through
assignments’. The step-by-step abandonment of the controlled wage system (1959-1963)
finished with this attractive consulting market.
From the 1960s onwards consultants expanded their activities to broader themes such as
strategy and organisation development. This was certainly enhanced by the establishment of
Dutch branches of US consultancy firms such as McKinsey (1964) and A.T. Kearney. As a
side-effect the consulting industry also became less than previously focused on the
manufacturing sector, which might explain why we did not find earlier consulting
interventions in the banking sector. This is not to say that the first consulting assignments in
banks were supply-driven. As we will see below, the entrance of the first management
consultants in the banks under study was related to specific developments within the banking
organisations. In the following sections we will analyse the consulting interventions in the
different banks by describing and comparing the nature and impact of the consultancy
services as well as the relationship between the banks and their advisors.
3.2.4 Dutch banks consuming consultancy services
3.2.4.1 American consultancies at the commercial banks Amro Bank was in 1968 the first Dutch bank to hire management consultants. The other large
commercial bank in the Netherlands, ABN Bank, engaged its first consultants in 1972. In both
cases external experts were commissioned for similar reasons and at a similar stage in their
organisational development. Both banks had been formed through mergers in 1964. Only one
week after the announcement of the merger between Nederlandsche Handels-Maatschappij
(NHM) and Twentsche Bank (DTB) into Algemene Bank Nederland (ABN Bank), the other
two major commercial banks, Amsterdamsche Bank (AB) and Rotterdamsche Bank (RB)
announced their amalgamation into Amsterdam-Rotterdam Bank (Amro Bank). It was no
coincidence that the four largest commercial banks merged at the same time. Although the
individual banks did not all four have an equal urgency to look for merger partners, once the
game of merger negotiations had been started by NHM and DTB - for whom merging was of
vital interest - the other two banks could not stay behind. The complex merger negotiations
might as well have resulted in other combinations, but a mixture of business and personal
factors eventually led to the formation of Amro Bank and ABN Bank.
- 89 -
Apart from the hiring of external accountants who had to value the potential partner’s capital,
external advisors played no role in the merger negotiations. Intermediaries were not needed
because the directors of the commercial banks often met each other. Bankers met each in
interbanking meetings such as the Nederlandse Bankiersvereniging (the present Nederlandse
Vereniging van Banken - Dutch Association of Banks). They often also held positions as non-
executive directors (commissarissen) in Dutch companies and as such they met each other in
the network of industrial decision-makers. In addition, the executive and non-executive
directors were very keen on leading the merger process themselves, because their personal
ambitions and future positions were at stake.
Personal factors remained important in the post-merger period. At Amro Bank the new
Managing Board was chaired by C.A. Klaasse, the former president of AB. Until 1967 many
functions within the board were occupied simultaneously by two men of both old banks.
Klaasse’s retirement in 1968 marked the end of the first phase of the post-merger integration
and was viewed a good moment to think about restructuring the top level organisation. Unlike
the earlier phases of the integration process this would now directly concern the members of
the Managing Board themselves. This, and the uneasy relationship between the two chairmen
J.R.M. van den Brink (formerly AB) and C.F. Karsten (formerly RB) - the dual chairmanship
had been decided upon during the merger negotiations - made external advice necessary and
paved the way for the first assignment of the management consultants of McKinsey & Co.
The events at ABN Bank followed a similar course. After the retirement of the new President
H.W.A. van den Wall Bake (formerly NHM) in 1969, the executive directors were headed by
a Presidium of three men, chaired by J.C. Wurfbain (formerly DTB). With the retirement of
the latter in 1972 the old leaders of the separate blood groups were gone. This created the
opportunity for an evaluation of the top structure of ABN Bank. Indeed, in the meeting of the
Managing Board in which the post-Wurfbain period was first on the agenda, the idea to hire
an independent consultancy was immediately suggested. The parallel with Amro Bank was
even more manifest when Wurfbain was succeeded as President of the Presidium by the two-
headed chairmanship of A.F.J. Dijkgraaf (formerly DTB) and A. Batenburg (formerly NHM).
The relationship between these two directors was somewhat strained as well, which made it
difficult to direct the delicate reorganisation of the top level from inside and necessitated
external consultation.
- 90 -
Thus, at the two commercial banks the first management consultants were commissioned
because post-merger integration had moved upward from the lower organisational levels and
had reached the highest level of the banks’ hierarchies. The executive directors had managed
the reorganisation of the lower strata of company officials themselves. They were uncertain
about their capability to lead this process at their own level, which insecurity was possibly
intensified by the fear of power games because of the forced situation of the dual
chairmanships. Both Managing Boards decided to hire the most prestigious management
consultants, i.e. American consultancy firms.
At Amro Bank chairman Karsten was a strong advocate of the use of external advisors. At
Rotterdamsche Bank he had already shown that the executive director of a bank should not
only be a banker but also a manager of the organisation. He had displayed a great interest for
the management of organisational change and under his leadership RB - in contrast with the
other large commercial banks - had commissioned external experts for issues such as public
relations, financial reports, cost price calculation and the administration department. Karsten,
who was greatly interested in the American way of business and who had early in his career
written a dissertation on the American banking sector, probably also suggested the choice for
McKinsey, one of the few American consultancy firms in the Netherlands in 1968.
When ABN Bank searched for a suitable management consultancy firm a couple of years
later, they also approached McKinsey. Not because intentionally they attempted to mimic
their rival Amro Bank, but because it was the obvious choice for any organisation that did not
even consider the possibility of a Dutch consultancy firm. Amro Bank, however, after being
informed by ABN Bank itself, intervened and urged that McKinsey would not accept the
assignment. McKinsey’s withdrawal imposed restraints on ABN Bank. Firstly, because ABN
Bank was confronted with increasing searching costs because they had to put out the
assignment to tender. The other restriction was formed by the language barrier since there was
only a limited number of American consultancies with an office in the Netherlands and with
Dutch-speaking consultants. The assignment was eventually given to Arthur D. Little
(established in Brussels), an American consultancy firm which had stressed in its letter of
proposal that three consultants out of five of the core team spoke Dutch as their mother
tongue.
- 91 -
The working procedures of the two consultancies McKinsey and Arthur D. Little were
different. The assignments given by the banks, however, did not vary essentially; in both
cases it was asked to redesign the (top) structure of the organisation in order to be better
equipped to reach the strategic goals. At both banks the consultants interviewed the first two
hierarchical levels (the Managing Board and the general managers) and only occasionally
someone of the third level. McKinsey, however, also interviewed a selection of the large and
medium-sized clients of Amro Bank. The executive directors of Amro Bank closely
monitored these interviews; they spent a lot of time in selecting the clients and asked for more
interviews at the third management stratum. At ABN Bank the consultants of Arthur D. Little
interviewed a smaller number of people, which may be the result of the limits in time and
expenses that ABN Bank had set. The working procedure of McKinsey led to more contacts
between the consultants and the client. There were numerous moments of feedback, with the
result that the final reports were indeed co-products of the consultants and the Managing
Board. This, of course enhanced the acceptance of the final advice. The process of feedback
was taken seriously by most executive directors, amongst whom was Karsten. Progress
reports were studied critically and checked on earlier amendments or remarks.
The style of Arthur D. Little turned out to be more confrontational. The first preliminary
memorandum of Arthur D. Little, for example, aroused a great deal of commotion at the
Managing Board of ABN Bank, because the consultants suggested that the bank changed its
articles of association on the point of responsibilities of the executive directors. According to
the consultants a collective responsibility of the Managing Board within the own organisation
could not be maintained. It is not clear whether the foreign consultants were aware of the fact
that this was quite normal according to Dutch corporate law. During the whole year of 1973,
the Managing Board of ABN Bank needed many internal meetings to discuss the ideas and
implications of Arthur D. Little’s preliminary recommendations. During several weeks the
project was daily on the agenda. One thorny subject was the composition and the
specification of responsibilities of the supervisory board (the board of non-executive
directors). It was obvious that the number of commissarissen had to be reduced. In order to
prevent that the lack of consensus between the Managing Board and Arthur D. Little on this
point would become known to the supervisory board itself, it was eventually decided that the
consultants would refrain from an advice concerning these non-executive directors, in contrast
with their earlier assignment.
- 92 -
At both Amro Bank and ABN Bank the final recommendations of the external advisors were
largely implemented. The Managing Board of ABN Bank hesitated about commissioning
Arthur D. Little for a follow-up assignment of the implementation of the reorganisation plans.
Firstly, because the earlier experienced language barriers were supposed to play a larger role
in the implementation process. Secondly, because the Board thought that the implementation
was actually their own responsibility. It was decided that Arthur D. Little would be
commissioned to support the first phase of the implementation, and in later stages would only
support on an ad hoc basis.
In its further history ABN Bank only consumed consulting services in negligible quantities.
This was largely due to the management’s perception and elaboration of their responsibilities.
In comparison to their colleagues at Amro Bank the management had a firmer grip on the
organisation. The corporate culture of ABN Bank was also more cautious and more cost
conscious than at Amro Bank, which also diminished the inclination to hire consultants.
Berendsen describes an anecdote which clearly illustrates the difference in company culture
that was still noticeable in 1990 at the time of the merger of the two banks into ABN AMRO
Bank. To celebrate the announcement of the merger, the executive directors of both banks
decided to have dinner together and exchange presents. ABN Bank had understood that Amro
Bank wanted to spend around “twelve-fifty” on these gifts. Not being able to find a suitable
present for such a low sum, ABN Bank decided to raise their sum and buy a box of chocolate
of twenty guilders for each Amro executive director. Only when they received in return sets
of gold cuff links of their Amro colleagues, it dawned upon the ABN directors, that twelve-
fifty had meant 1,250 guilders in stead of 12.50!
Amro Bank, by contrast continued to hire consultants and became a regular client of
McKinsey. Occasionally other, Dutch, consultancies were hired for very specific subjects,
such as automatic data processing or the cost management of large building projects. But for
the issues with a strategic dimension, McKinsey was chosen. Of the 23 years from the first
assignment in 1968 to the year of the merger with ABN Bank in 1990, only in 4 years
McKinsey did not leave a trace of a consulting intervention in the corporate archive. This
does not preclude the possibility that McKinsey invoiced Amro Bank in those missing years
for small services on an ad hoc basis such as assistance at an evaluation session of an earlier
reorganisation process. McKinsey for example had assisted at two meetings of the Managing
Board when this evaluated the reorganisation project of 1968. Amro Bank hired McKinsey
- 93 -
for large operational projects such as the organisation of the branch network (1969), the
organisation of domestic banking activities (1973), and cost management (1976-77) but also
for the development of new strategies such as the project to come to an international strategy
(1977-78) or a special strategy for the United States (1983-84). The management of Amro
Bank was very susceptible to the way McKinsey carefully built its relation with its first major
banking client in the Netherlands. Not only did McKinsey constantly attempt to create the
urge for new assignments by underlining in their final report the complexity of the problem of
the current assignment or glancing at a related subject, the consultants also invested heavily in
the trust basis of their relation. In this process, Amro Bank was not a passive party. In fact,
management of the Amro Bank claimed that the bank had special rights as a client and
effectively attempted to monopolise “their” consultancy firm McKinsey. Until the late 1980s
Amro Bank prevented that McKinsey developed long-term consulting relationships with any
other large Dutch bank. As we have seen above this started with ABN Bank, which might
have developed a different attitude towards management consultants if they had got involved
with McKinsey.
3.2.4.2 Consultants at the co-operative Rabobank Similar to the commercial banks, the first assignment of management consultants for co-
operative banks was also related to a merger. The position of consultants, however, differed
considerably in this case. This can be explained by the different nature of the co-operative
merger, stemming from its particular history.
In 1896 at the end of the agricultural depression the first agricultural credit co-operative of the
German Raiffeisen type was founded in the Netherlands. The modernisation of the
agricultural sector stimulated the establishment of co-operative banks. During the first
decades of the twentieth century the rural credit co-operatives spread rapidly and a dense
network of small provincial agricultural banks was created. In the 1920s the number of
account holders almost matched the number of farms. The success of the credit co-operatives
was built on the central position of these banks in the small communities which gave access to
informal information about the credit-worthiness of local farmers.
As early as 1898 two banker’s banks for the agricultural banks, the so-called Centrales, were
founded. The creation of two separate central organisations was, apart from personal conflicts
- 94 -
and geographical distances caused by the river delta, due to the pillarisation (verzuiling) in the
Dutch society. Different groups of the population defined by religion or ideology, for example
the emancipating Catholics, increasingly organised themselves separately from other groups.
Consequently there were independent societies such as trade unions and political parties. This
societal process also hampered the creation of one central bank for all co-operative banks.
Thus, the Centrale Coöperatieve Raiffeisenbank was established with a head office in Utrecht,
and the Centrale Coöperatieve Boerenleenbank was founded in the southern town Eindhoven.
The latter was officially based on the Christian religion in general, but was in praxis for the
Catholic-oriented banks, which were mainly established in the southern part of the
Netherlands. The Centrale Coöperatieve Raiffeisenbank in Utrecht had a neutral basis, but
attracted more banks of a Dutch Reformed orientation.
In the course of the years the Centrales developed into more than mere banker’s banks.
Although in the co-operative structure the Centrales were subsidiaries of the combined
mother-banks (i.e. the local banks), they became increasingly important in the development of
policy. In the organisational culture of the Centrale Coöperatieve Raiffeisenbank (Utrecht) the
autonomy of the member-banks was emphasised more than in Eindhoven where the structure
was de facto more centralised. However, in the eyes of most ordinary clients of the local
banks - who decreasingly were members of the co-operation - the local banks were simply
branch-offices.
The diversification in the Dutch banking sector especially the inroads the commercial banks
made into the traditional client-group of the co-operative banks, led to a fierce competition
between both organisations. Both expanded, at considerable costs, their already very large
networks of branch-offices. On top of this, the automation which was necessary to enhance
the service for the already numerous clients, was very expensive. For that reason, in the years
1967 to 1970 the two central banks were drawing together when they attempted to limit their
competition on the local level. This turned out to be the first phase of a long and cautious
merger process; in 1970 the banks announced to prepare the establishment of a merged co-
operative bank. Both central banks had to win their members (the local banks) for this plan.
Three years were scheduled for this process which would partly be led by the newly
established Coöperatieve Raiffeisen-Boerenleenbank WA, established in Amsterdam (and
later in Amstelveen). The official motivation for this location was that Amsterdam was the
financial centre of the Netherlands. The actual reason, however, was that the obvious choice
- 95 -
for the centrally situated city of Utrecht, where the Raiffeisenbank was settled, was deemed
too sensitive for the Boerenleenbank (with its head office in Eindhoven).
Much sooner than expected, in May 1972 the members of both central banks voted in favour
of the merger. A couple of months later most member banks had joined the new central bank
Coöperatieve Raiffeisen-Boerenleenbank GA. This concluded the official merger process.
The relatively long genesis of the merger between the two Dutch agricultural banks in
comparison with the two mergers of the commercial banks in 1964 was a direct result of the
co-operative structure. Although the Centrales had increased their leading role in the course of
the decades, it was only after consultation with the member banks that such a far-reaching
decision could be taken. The name of the new bank was easily found in the acronym
Rabobank, a name that paid tribute to the historical roots. More delicate was the housing-
question of the new central bank. Even before the official approval of the merger by the
member banks, the Managing Boards (Raad van Beheer and Hoofddirectie) of the combined
central banks had hired one of the oldest Dutch consultancy firms, Berenschot, to advise them
on this matter. After a short research Berenschot advised to lodge the new central
management in Utrecht, whereas the old headquarters could remain in Utrecht and
Eindhoven. Since the executive directors of the central bank were convinced that the housing
in Amstelveen had only been a temporary solution, they were happy to be backed up in this
by the independent consultants.
Berenschot was requested to formulate its advice within two months. The consultancy firm
realised that the assignment gave them a foot in the door and consequently emphasised in its
report that although the firm understood that the urgent housing-question could not be
postponed it should have been preceded by an in-depth study of the structure of the merged
banks. Therefore, the consultants had somewhat extended the strict assignment and had
included some starting-points for a potential future structure of the merged organisation in
their recommendations. Berenschot's plan worked. Immediately after the first assignment, the
consultancy firm was commissioned for a more elaborate task; Berenschot was asked to
design a new organisational structure for the Centrale, while originally it was planned to make
this internally.
Thus, similar to the two commercial banks the first consultancy assignments at Rabobank
were related to post-merger issues. However, Rabobank hired consultants at an earlier stage.
- 96 -
In addition, there was a major difference in the post-merger integration process itself which
had implications for the use of consultants. The merger of the co-operative agricultural banks
were in fact mergers at three levels. At the local level, many of the member banks of
Raiffeisenbank and Boerenleenbank that operated in the same area were supposed to merge as
well, but because of their autonomy they could not be forced to. It is not plausible that these
local banks hired management consultants for their mergers, because the local co-operations
could get assistance of the central bank.
The most complex part of the merger process was the integration of the two complete
organisations, which included the relation between the local member banks and the central
bank. Because of the co-operative structure of Rabobank the total organisation was less
hierarchical than the commercial banks. Although the old Boerenleenbank had been more
centralised than the old Raiffeisenbank where local autonomy had always been highly valued,
in both organisations the final authority had been with the local banks and not with the central
bank. Consequently, plans that concerned the entire organisation of the co-operative banks -
especially the relation between the central bank and the local bank members - could not be
simply dictated by the Managing Boards. The need to get approval of the members of the co-
operation made the potential role of external advisors in this part of the post-merger
integration very limited. Indeed, instead of making use of external experts numerous internal
committees attempted to reach a consensus in lengthy discussion and consultation rounds.
Especially the so-called Structure Committee (1975-1976) played an important role in this
integration process.
A third level of the merger was the integration of the two Centrales, the top co-operation. As
we have seen above, the initiative to hire the Dutch consultancy firm Berenschot was taken by
the highest management level, the Managing Boards (the Raad van Beheer and the
Hoofddirectie). The assignment of Berenschot was restricted to this central level; the
consultants were only commissioned to advise on the internal organisational structure of the
central bank. Therefore, we will only look at the role of management consultants at the level
of the top co-operation.
In contrast with the commercial banks, in the early 1970s Rabobank was hardly
internationally oriented. This was also illustrated by the choice for Berenschot. Still, this
choice for a well-established Dutch consultancy firm could not prevent misunderstanding and
- 97 -
disagreement about the distinctive character of Rabobank. Even though the Berenschot-team
interviewed at more levels in the hierarchy of the (central) organisation than the consultants at
the commercial banks did - they interviewed managers of the first three levels, and
occasionally also officials of the fourth stratum - the preliminary ideas of the consultants
about the desired structure of the central bank were criticised by both the Raad van Beheer
and the Hoofddirectie. The criticism focused on the fundamental and delicate point of the
distinctness of the co-operation. The Berenschot consultants were accused of looking at the
Rabobank as an ordinary, commercial organisation. Apparently the consultants had not got
away from the usual concern-construction with holding companies and subsidiaries. However,
so Rabobank argued, the power was not at the top but at the basis of the organisation. In short,
the consultants were criticised of neglecting the historical and emotional background of the
co-operation. Berenschot, however, argued that from a rational point of view the central bank
was a “going concern”, and the legal, historical and emotional characteristics of the co-
operation were not essential for the structure of the central bank. Technically speaking, the
consultants maintained, the banking activities were the same as those of the commercial
banks. Eventually, during a retreating-weekend organised by Berenschot the Managing
Boards officially decided that the consultants’ advice on the structure should be based on
rationality only. This was mainly a practical decision to keep the assignment workable for the
consultants. It certainly did not mean that Berenschot’s opinion was internalised. For
example, the Hoofddirectie rejected the statement of Berenschot in the final report that
although it was unquestionable that the Rabobank organisation had a specific position in the
Dutch banking sector, the market behaviour of Rabobank was not any different from the
general banks.
Notwithstanding these differences in opinion, the final advice of Berenschot to structure the
organisation of the central bank along five parallel divisions was adopted. The five divisions
would be led by five directors, who would form the Hoofddirectie on the basis of equality.
However, the number of managing directors was not restricted to five, in contrast with the
recommendations. This prevented not only the forced retirement of some of the current
directors, it also created the opportunity that two directors could dedicate their time to internal
relations within the co-operative organisation and external relations with co-operative firms.
This was another manifestation of the importance that the Rabobank directors attached to the
co-operative structure of their organisation.
- 98 -
Within two years it was clear the top structure of the central bank as proposed by Berenschot
did not work. One of the problems was that both partners had to be represented on an equal
base in the top. As it was said that Raifeissenbank brought the money to Rabobank and
Boerenleenbank contributed the brains, this proved not easy at all. Apparently it was not held
against the consultants, because the same Berenschot was asked to advise how the top
structure could be made to work. In their diagnosis the management consultants implicitly
defended themselves by including a theoretical argument about the fundamental difference
between a form of management by equality as had been recommended and management by
unanimity as the Hoofddirectie had falsely interpreted it. Both management styles were based
on the Dutch legal principle of collective responsibility of the Managing Board (see also
above), but taking only unanimous decisions clearly hindered the efficiency of the Managing
Board. Some minor changes in the structure of the central bank and more essential changes in
the division of tasks of the Managing Board were proposed and implemented.
The relationship between Rabobank and the consultancy firm Berenschot did not further
develop into a close consulting relationship. In fact, Rabobank in the 1970s made only limited
use of consultancies. In 1982 the Centrale prepared a long term cost-management project with
the name “Opvoering Toegevoegde Waarde” (OTW; Increasing Value Added). It was decided
to hire McKinsey because this consultancy firm had made name with its Overhead Value
Analysis (OVA) and its experience in the banking sector. McKinsey’s involvement in 1983-
84 was based on the do-it-yourself concept; the consultants instructed a Rabobank team,
which would teach the methods to assess costs and effectiveness to the approximately eighty
units that were involved in the organisation-wide project. In addition, McKinsey assisted the
Rabobank teams during the first phase of the project, and probably would extend this
assistance to the phases to come.
Because of their special relationship with Amro Bank, McKinsey reported the assignment to
this bank, at the same time informing Rabobank about the restrictions that their services to
Amro Bank imposed on them. Nevertheless, the underlying idea was that the consultants
participation during the first phases of the OTW-project would lead to a multi-year
involvement of the management consultants, since these were all non-strategic issues
concerning operational improvement. However, it was exactly this non-incidental character of
the consultancy service that Amro Bank abhorred. Consequently, after the first phase of the
OTW-project early 1984, Amro Bank asked McKinsey to withdraw from Rabobank.
- 99 -
Chairman R.J. Nelissen of Amro Bank personally intervened by calling his Rabo-colleague P.
Lardinois After consultation between all parties, McKinsey indeed left Rabobank. The OTW-
unit in New York, however, kept working with McKinsey on the cost-management project.
Ironically enough some months later, this relationship was also ended, because of the very
high costs involved for the Rabobank.
3.2.4.3 In search for unity: consultants at the savings banks The increased competition of banks in the 1960s also affected the savings banks. One of the
reactions of the savings banks to deal with this, was engaging a consultancy firm to
investigate the possible forms of co-operation between the numerous savings banks. The
decision to hire a consultancy was taken in 1968, almost simultaneously with Amro Bank
hiring McKinsey. To understand why the consultants at the savings banks had less impact in
comparison to their colleagues at the commercial banks, it is necessary to look at the
historical background of the savings banks.
Savings banks belong to the oldest financial institutions in the Netherlands; the first savings
bank was founded in Haarlem in 1817. Savings banks primarily aimed at promoting thrift
among labourers, small craftsmen and servant girls. The number of savings banks grew
rapidly in the course of the nineteenth century, although the deposits made were still relatively
small. The aims of savings banks were not primarily financial but rather idealistic. Thrift was
encouraged as part of the civil moral which formed a firm base for the Dutch society. In the
second half of the nineteenth century the record number of nearly 300 savings banks was
reached. However, one can make some critical remarks on the success of the savings banks
movement. Both the daily management and the board of the savings banks, which all operated
independently, were formed by local dignitaries. There was a big discrepancy between the
target group that the savings banks had in mind and the actual depositors. The ones who
benefited most from the savings banks were small traders and the reasonably well-off middle
classes, not the ordinary labourers who were supposed to be encouraged to save. Another
point of criticism was the uneven geographical spread: savings banks were especially active in
the cities and not in rural areas; notably in the Catholic south there were hardly any savings
banks to be found.
- 100 -
Therefore, the government intervened with the founding of Rijkspostspaarbank (RPS, the
postal savings bank) in 1881. The immediate success of RPS forced the private savings banks
to recognise the need for renewal and professionalisation. The emerging agricultural co-
operative banks formed an extra challenge for the savings banks, because these banks entered
the savings market as well. It gradually transpired that in many cases savings banks were
dated institutions, driven “first and foremost by the desire for solidity and as a consequence
averse to new roads,” as a critic put it. The increased size of the banks called for professional
management and stricter inspection. This modernisation development led to the conclusion
that closer collaboration was inevitable. Hence in 1907, the Netherlands Federation of
Savings Banks was established. However, the scope of activities of the new Federation was
limited due to refusal of many individual banks to join. This was a result of the strong sense
of autonomy of the managements formed by local dignitaries. Many of them were not
prepared to give up part of their independence for the benefit of a central organisation.
Individual savings banks could choose to stay out of the Federation, because it was not a
central bank. Unlike the agricultural co-operative banks, savings banks did not provide credits
and hence were not forced to co-operate in a central bank that diminished the risks. This
individualism, which was remarkably strong among savings banks, later also considerably
limited the chances of co-operation and concentration.
It was government intervention that eventually brought all savings banks together in the
Federation. The Credit Control Law of 1952 gave De Nederlandsche Bank (DNB, Dutch
central bank) the authority to issue regulations regarding the solvency and liquidity of banks.
The Dutch central bank entrusted the financial monitoring of the savings banks to the
Federation of Savings Banks. This enhanced the importance of the Federation because all
savings banks were now legally obliged to join. Attempts to found a central bank, however,
still met with strong opposition from savings banks. They cherished their autonomy, which
would be undermined by the creation of a strong central organisation. In addition, they feared
that the creation of such a central bank might bring along exceptionally high costs. As a
result, the organisation of savings banks remained highly decentralised.
The diversification in the banking sector in the 1960s set new challenges for the savings banks
with their traditional target groups and social aims. The rise of commercial banks came
entirely at the expense of the share of the savings banks and RPS in savings balances. These
developments forced savings banks to participate in the emerging process of diversification.
- 101 -
They responded by entering the personal loans and mortgage market and by searching for
customers outside their original clientele. All banks entered the retail market by offering their
customers personal accounts, continuous credit, and a wide range of other banking services.
The diversification into retail banking put the profit margins of the savings banks under
pressure. Therefore, savings banks looked for ways to reduce costs and simultaneously
strengthen their competitiveness. Especially the formation of ABN Bank and Amro Bank in
1964 impelled the savings banks to discuss their future. Co-operation and concentration were
seen as the best way to improve the position of the banks. Several common institutions were
established such as a Co-operative Investment Fund (already in the 1950s), a Management
Development Institute and a Central Administration System. Nevertheless it was clear that a
more structural reorganisation was inevitable.
The Federation attempted to stimulate regional co-operation and mergers of local savings
banks, but refused to press its members to more concentration, because it was well aware of
the historical roots of the savings banks. The process of concentration was furthermore
complicated by the growing antithesis between the local dignitaries as members of the board
and the professional managers of the savings banks who became more influential. The board
often feared to be outmanoeuvred by the management. Nevertheless the urge for co-operation
became stronger as the savings banks lost ground. For that reason in 1968 the General
Meeting of the Federation, in which all savings banks were represented, decided to hire the
Dutch consultancy firm Berenschot to advise the banks on the future structure of their co-
operation. The formal assignment to Berenschot was given by the board of the Federation.
The board asked Berenschot to study the mutual relations between the Federation and the
other central institutes on the one hand and the relation between the Federation and the
individual savings banks on the other.
Thus, while at the two commercial banks Amro Bank and ABN Bank, as well as at the co-
operative Rabobank the first consultants’ assignments were given after the decision to merge
and restructure the entire organisation. In the case of the savings banks, the expertise of
consultants was requested before this kind of strategic considerations was supported by the
collection of savings banks.
Berenschot produced an advice in two separate reports which were of a different nature. The
first report was produced in close co-operation with the staff of the Federation. The
- 102 -
development of the financial sector and the consequences for the position of the savings banks
were described. It made clear why structural changes were necessary to realise a more
uniform and adjusted policy for the savings banks. It also gave some recommendations on the
future structure of the savings banks and their policy. Regarding their policy more uniformity
was strongly recommended. The different savings banks had to offer a more uniform service,
adopt a common name and trademark and a uniform administration. It would be necessary to
discuss voluntary co-operation between neighbouring banks under supervision of the
Federation. In general the banks would have to accept more influence from the Federation on
their local operations. Regarding the board of the individual banks it was recommended that it
would give more responsibility to the manager. The board should function more like a
supervisory board and refrain from intervention in daily affairs. Moreover members of the
board would have to retire at a certain age and were no longer allowed to combine their
membership with other functions in the financial world. The first report only made some
general remarks about the central institutions. It was stated that the functioning of these
institutions was hampered by their geographical dispersion and the fact that they all had their
own organisational structure with their own membership and board. It was clear that strong
co-ordination of marketing, financial policy and organisation was impossible in this situation.
The second report was presented half a year later and was based on more intensive research of
the existing situation. Berenschot visited different banks and interviewed managers and
members of the board of these banks. The consultants learned from these interviews that the
autonomy of the individual banks had to be respected. For that reason it was not considered
expedient to reach integration by transferring powers from local banks to the federal board.
Moreover Berenschot discovered there was a lack of mutual trust between the banks and
especially there was a divergence of interests between smaller, medium sized and big banks.
Therefore, an important condition for the future organisational structure was an adequate
communication between the different banks and their common organisation. To realise this
Berenschot advised to create a federal council which was constituted by regional circles of the
local banks. This council in Berenschot's vision would have a primarily advisory function. It
was to be consulted by the federal board in a number of cases that affected the organisation as
a whole, but also the individual banks. On the other hand the council would inform, through
its circles, the individual banks of the plans and issues the board was discussing. The council
would represent all different interests in the Federation and thus mirror the General Meeting.
In this way the board, which in Berenschot’s proposed structure was responsible for the long
- 103 -
term policy, would create more support in the organisation. The board in the new structure
was not the representative meeting it used to be. It was a relatively small board which
consisted of specialists who were primarily chosen for their capacity to formulate an effective
policy. The position of the board would also be strengthened because the different central
organisations in the new structure would be incorporated in the Federation. Daily
management would be entrusted to one or more professional executives. What would emerge
was a strong central organisation which in its structure in general resembled that of the later
Rabobank.
To avoid conflicts and strains Berenschot explicitly stated that the board and central
organisation in their contacts with local banks would not operate in a high-handed and
hierarchical way, but would be stimulating and encouraging. Berenschot envisaged that the
reorganisation would be difficult and drastic. It was considered important that the process
would be smooth and with the consent of all parties interested. For that reason Berenschot
proposed to coach and advise on different projects that would contribute to the reorganisation.
The board of the Federation was indeed very anxious to avoid conflicts but it did not
commission Berenschot. Before proposing implementation of the Berenschot reports it
consulted the general meeting and also send questionnaires to all local banks. After a lengthy
consultation in which all parties were involved, the board proposed in the General Meeting in
1970 a rather drastic statuary reorganisation. In the new organisation which was created many
of the recommendations of Berenschot were realised. A federal council was created which
represented the local banks through ten regional circles. This council was expected to enhance
the communication between the Federal institutions and the local banks, but also was intended
to form the basis for future integration into regional banks. Some of the central institutions
were integrated in the Federation, but several others, among which the Central
Administration, kept a relatively independent position. The Co-operative Investment fund was
integrated into the newly formed Federal Central Bank (Bank der Bondsspaarbanken), which
was still to a high extent independent from the Federation. Another essential difference was
the function of the board. The General Meeting kept its position as the highest decision-
making body. The board remained a representative body which was responsible for daily
management and only executed the decisions of General Meeting. It was not able to initiate its
own policy.
- 104 -
The recommendations of Berenschot thus were only partly implemented. The fact that the
board did not get policy-making powers, proved to be decisive for the future of the
Federation. The discussion on the structure of the Federation went on, also because the
savings banks continued to lose ground on the savings market. This was an alarming situation
which in 1975, five years after the first report, impelled the Federation to ask again the advice
of Berenschot. This time Berenschot was commissioned by the Federation not for an
organisational advice, but to analyse the earning capacity of the savings banks. It was clear
that the remunerativeness of the savings banks was decisive for their survival, as was
underpinned by the title of the report ‘Earning capacity and continuity’. To check the position
of the savings banks a random test of ten representative banks was done by Berenschot.
The conclusions were rather alarming. It was clear that the banks were confronted with a
substantial and continuous rise in their costs. These mounting costs were caused by rising
wages, the necessity to invest in automation and the development of most savings banks in the
direction of retail banks. This caused substantial expenses which were not in all cases
remunerative. As long as the interest rate continued to rise, these expenses were compensated
by the rising margins. But it was clear that once the interest rate would begin to decline the
savings banks were in trouble. Another menace was caused by the rather steep rise of the
savings entrusted to the banks. To handle the risks of their operations the capital of the
savings banks would also have to grow. It was however, as the margins were already not too
broad, impossible for the savings banks to set aside more to their reserves. As their share in
the market was under pressure, their costs were rising and their margins were insecure, it was
clear that the continuity of the savings banks was threatened. Berenschot once more
emphasised the necessity of a strong central organisation with substantial power.
This conclusion was shared by DNB (the Dutch central bank), although DNB criticised some
of the data Berenschot had produced. DNB also questioned the random test Berenschot had
done, because it was clear the majority of the banks included were performing rather well.
Nevertheless, the advice to create a central organisation that could formulate a common
policy and in some cases overrule the local banks was welcomed by DNB. It only regretted
Berenschot did not give more detailed advice on the structure of this central organisation.
This, however, was clearly beside the commission Berenschot was given this time. The
Federation and its member banks in 1975 were not ready for a new round of integration and
further concentration in a common central organisation. In fact a growing number of savings
- 105 -
banks sought to fight the competition of the general and co-operative banks in further co-
operation on the local level. As a result of a continuous process of local mergers between
1960 and 1980 larger units of regional savings banks emerged. In the long run two
conglomerates of savings banks emerged, VSB and SNS. In the 1990s they merged with
insurance companies to form all-round financial institutes. In this integration process the local
banks with their autonomous boards after more than 150 years completely disappeared. The
position of the Federation was marginalized as the savings banks grew bigger and more
powerful. The Federation ultimately had only two members, VSB and SNS, was therefore
dissolved in 2000.
3.2.5 Concluding remarks
The described case studies of commercial, co-operative and savings banks confirmed the
proposition that the organisational structure of the client bank had an impact on the role of
management consultants. Consultancy intensity and the type of consulting firm contracted
(American vs Dutch consultancies), for example, differed between the categories of banks.
Commercial banks tended to choose American consultancies, whereas co-operative and
savings banks preferred Dutch consultancies.
The most striking differences between the three types of banks were caused by the different
authority structures within the bank organisations. In the hierarchical, top-down decision
structure of the commercial banks Amro Bank and ABN Bank the implementation of the top-
structure designed by consultants was much easier than in organisations in which autonomous
members take decisions based on consultation and consensus, such as the co-operative
Rabobank and the Federation of savings banks. The cases of the commercial banks indicate
that the advice of consultants can be a valuable instrument in the hands of an hierachical-
organisation management that fears internal power games.
The potential role of consultants in consensus-driven organisations was more diffuse.
Decisions in the federative and co-operative boards (of the savings banks and the co-operative
banks respectively) were taken bottum-up. The Federation of the savings banks attempted to
use consultants to push the organisation towards the necessary process of concentration and
centralisation. This did not work, however, because in a loose organisation in which
autonomy is a central value such a process cannot be enforced by external experts It took until
- 106 -
the 1980s before the process of concentration really started, and this was not a result of
interventions of consultants. The limited role of management consultants was far better
understood by Rabobank than by the savings banks. Rabobank commissioned consultants
only to advise on the internal structure of the central organisation and consciously left the
relation between the central organisation and the autonomous members outside the
assignments.
All Dutch banks faced the same challenge of increasing competition, caused by the decrease
of the segmented structure of the financial sector. Consultants, however, could not simply
apply a standard centralised organisation for all banks, because the category of the banks
demanded an adaptation of the design to the (historical) context of each specific bank. It was
expected that it was easier for consultants to implement standardized techniques at the
different banks, such as McKinsey’s device for cost management, the Overhead Value
Analysis. However, we discovered a peculiarity of the Dutch market that prevented such an
easy diffusion of ideas through consultants. Because of the above mentioned higher likeliness
of the effectiveness of consultants advices in hierarchical organisations, it was more probable
that long-term consulting relationships developed between the commercial banks and their
consultancies. Indeed, Amro Bank grew very attached to “their” consultancy firm McKinsey
& Co. From 1964 to 1990 Amro Bank even managed to claim a special relationship with the
consultancy firm. This relationship (called “prime client status”) was shaped by a mutual
dependence between client and consultant. It had major consequences for the use of
consultancies in the rest of the Dutch banking sector, since Amro Bank actually hindered
McKinsey to spread management ideas in the whole sector.
A new merger wave in the early 1990s brought considerable changes in the Dutch financial
sector. Banks not only merged with each other (ABN AMRO Bank) but also with insurance
companies, as was the case with the savings banks VSB and SNS, that were products of
mergers itself. In combination with the deregulation and the rapid internationalisation of the
Dutch financial sector, these mergers changed the Dutch banking sector as a consulting
market. The attitude of the different banks towards consultants converged, as the importance
of differences in organisational structure seemed to diminish.
- 107 -
3.3 Consultants in German consumer chemicals (Susanne Hilger) 3.3.1 Introduction
In 1999 management consultancies had a turnover of 21,3 Mrd. DM in the German market, an
increase of 13.3 per cent compared to 1998. In absolute terms, Germany is today by far the
most important consulting market in Europe in revenue terms. Most of the large service
providers in Germany and Europe as a whole are of American origin (cf. Kipping and
Armbruester 1998). They started their expansion to Western Europe in the late 1950s, when
firms like McKinsey, Arthur D. Little (ADL) and Booz Allen & Hamilton established offices
in the United Kingdom and subsequently, from the mid-1960s onwards, on the Continent and
came to play a significant role in reorganising and modernising European companies
(McKenna 1997; Kipping 1999) However, as has been pointed out, the “majority of German
firms” remained “suspicious or even hostile towards consultants until the mid-1970s”
(Kipping 1996).
Among the first companies in Germany to employ a US consultancy during the second half of
the 1960s was the consumer chemicals producer Henkel. This case is remarkable for at least
two reasons. First of all, as a family firm with a long tradition, Henkel was followed a
cautious and well-considered business policy, which manifested itself in a relatively closed
attitude towards outside influences, for example concerning external capital owners. In
addition, during the 1950s the company was dominated by a conservative business culture and
had proved reluctant to embrace American management and marketing techniques (Hilger
2002). At first sight it appears therefore rather surprising that Henkel was so early in hiring
American consultants. Secondly, unlike many other German companies, Henkel did not hire
McKinsey or ADL, but the Stanford Research Institute (SRI). This chapter will attempt to
elucidate these “mysteries” and also give some indication of the results of the co-operation
between Henkel and SRI.10
The chapter consists of three parts. The first part summarises the history of Henkel from its
foundation in 1876. The second part will give a brief overview of the activities of business
consultants at the company through the 1950s and attempt to explain the reasons of the
10 It is based on ongoing research by the author in the company archives. For detailed references see Hilger (2000).
- 108 -
company to hire the Stanford Research Institute. The third and main part of the article
examines the major consultancy project of SRI from 1966 to 1969, which can be subdivided
into several phases. The concluding part tries to assess the long term implications and
consequences of this consulting project and also givers an outlook of further consultancy
activities at Henkel.
3.3.2 A brief history of Henkel
The Henkel KGaA and its subsidiaries are today one of the worldwide leading specialists for
applied chemistry. Founded in 1876, Henkel & Cie established a market for detergents at the
beginning of the 20th century. The development of Persil, the first "self-active" detergent, in
1907 brought international growth for the company, yet the outbreak of the First World War
endangered this competitive position. The supply of key raw materials inlcuding water glass,
phosphate, soda and quartz was disrupted through wartime regulations and through the
isolation from world market for raw materials. Thus the company management had to procure
the needed materials through the incorporation of raw material firms such as the Duisburg
soda producer Mathes & Weber (1917).
The growing domestic demand and the rising export activities in the 1920s resulted in the start
of new businesses and the incorporation of more subsidiaries into the parent company. At the
height of the inflationary cycle in 1921, Henkel founded a subsidiary in Genthin near
Magdeburg. Three years later, it took a majority shareholding in the Krefeld soap producer
Dreiring. With the takeover of Thompson in 1933, Henkel completed the move into
household cleaning business. The rising sales posed not only new challenges in product
development, but also in sales and marketing as well as in packaging technology. Henkel
reacted from the beginning of the 1920s with the foundation and acquisition of paper- and
pulp-processing firms. From the end of the 1920s, the so-called "fat-gap" became noticeable
in the production of soap and detergent products. The situation worsened during the Third
Reich due to the National Socialist autarchy policy. The procurement of natural and synthetic
fats and oils therefore moved into the centre of Henkel's acquisition strategy, resulting in co-
operation with the German Hydrierwerke Gesellschaft (Dehydag), and the establishment of
the Erste Deutsche Walfang Gesellschaft (EDWG) and the German Fettsaeurewerke (DFG).
- 109 -
Henkel continued its expansion and diversification after 1945. Henkel had started the
production of adhesives after the First World War, when it had been difficult to procure Leim
for the making of the detergent packets. This line of business was expanded after the Second
World War, for example through the takeover of the Sichel company in Hannover (1962) and,
more recently, the acquisition of the American producer Loctite (1997). The same is true for
P3 production, a collective term for products and procedures for industrial cleaning and
disinfecting agents, which was pushed ahead after 1945 through the acquisition of firms like
Collardin (1955) and Ecolab (1989).
Analogue to the growth of the domestic business, Henkel also expanded international. Only
ten years after its foundation, Henkel had opened its first foreign sales office in Vienna in
1886. Business relations with the Netherlands, Italy, England, and Switzerland were also
established before the turn of the century. As the first foreign subsidiary, the Swiss firm
Henkel & Cie. was founded in Pratteln near Basle in 1913. After the First World War, branch
offices followed in Denmark (1923), Czechoslovakia and Belgium (1929), Finland (1930),
and the Netherlands (1932). One year later, in 1933, the Societa Italiana Persil S.p.A. in
Lomazzo was established to cover the Southern-European market. By contrast prior to 1945
Henkel was hardly represented outside Europe. This was mainly due to the strong
oligopolistic market for detergents in the United States, which was divided among Unilever,
Procter & Gamble, and Colgate. In the 1930s, Procter & Gamble and Henkel came to an
agreement establishing regional spheres of interest, focusing Procter’s business on the US and
Canada and leaving Henkel to pursue its business interests in Europe. The situation changed,
however, after the Second World War, when the American soap producers expanded
aggressively to Western Europe.
3.3.3 Shifts in the attitude towards external consultants
Since the 1920s Henkel had engaged external auditors for the purpose of drawing up its
balance sheets and providing tax consultancy services. But there is hardly any evidence for
the activities of other external consultancy in the field of administration and organisation
before the Second World. The company was run like an “oversized craftsman’s enterprise”
and its management had for a long time closed its mind to external influences, instead giving
preference to the advice of “friends of the family”, as was typical of family firms at the time.
- 110 -
To keep its independence the Henkel family also avoided external financing. Thus, the
company was scarcely affected by the influence of banks and the capital market. A similar
picture presented itself with respect to the company’s sales policy. Although Henkel ranked
among the forerunners of modern product marketing in Germany, the company did not begin
strengthening its advertising impact by engaging external advertising agencies until the
second half of the 1950s – a move triggered by the rapidly expanding international
competition.
After the Second World War, external consultants sometimes supported reorganisation
measures in the fields of finance and accountancy. Their tasks included helping with the
changes resulting from the German currency reform in the late 1940s or supporting measures
to increase productivity and efficiency on the shop floor and in the administrative offices. The
age of computerisation also raised a host of questions from the 1950s onwards, often leaving
the headquarters and the management of companies at a loss. Before bookkeeping and other
corporate divisions could be switched over to the new punch card systems, they needed to be
reorganised to ensure a “more simplified and effective cooperation”.
For the 1950s Henkel’s attitude towards external influences can therefore be described as
observant and in parts reserved. The co-operation with an American consultancy from the
mid-1960s onwards was clearly a break with the past, both in terms of its duration and its
scope. One of the reasons for what therefore seems like a rather surprising decision was the
expansion and diversification of the company in the post-war period. In the early 1960s,
Henkel’s top management realised that there was a growing awkwardness of the organisation,
which stood in the way of a flexible market policy. Modern management theories saw
company planning and organisation as the basic preconditions for a “systematic expansion”.
As the “economic environment” of the company became more and more complex and its
business activities were increasingly transferred to the European markets outside Germany,
production, marketing, and financing methods had to be used which “diverge somewhat from
the traditional ones”.
Probably even more important was a significant decline in the earnings in Henkel’s main
business. The company’s management recognized that this was due to the appearance of the
American competitors on the German market. Its business in branded products relied to a
large extent on Persil, Dixan and Pril, and there was a growing risk “that the market position
- 111 -
of these three articles will be strongly attacked by Procter and Colgate”. As a result, the
company became “aware, that the detergents market was endangered, and that is why we had
to look for new ways”. Thus, to become better acquainted with the modern management
techniques applied by many large international corporations, Henkel decided to look for an
American consulting firm. There are a numerous other examples, where the pressure from US
competitors led European companies to question their own practices and ask American
consultancies for help.11
Another reason for the more open-minded attitude towards US consultancies might have been
due to a “new generation of top managers” who “had experienced a significant American
influence during their formative years since 1945” (Kipping 1996: 120). According to the
company’s former chairman, Helmut Sihler, up to the beginning of the 1960s a “conservative
wing” dominated top management. Things changed with the appointment of Konrad Henkel
as chairman of the board in 1961. Driven by the belief that “we have to be modern, we have to
come to the top”, he succeeded in overcoming the strong conservative opinions in the
management team – however not without difficulties. Apparently, in the preliminary stages of
negotiations with the US consultants there had been an internal struggle (“interner
Machtkampf”) between the “progressive” and the “conservative” members of the executive
board.
Remains to be explained why Henkel, in contrast to other companies, did not hire McKinsey,
despite its reputation for divisionalising numerous European and US companies. Instead the
company contacted the Stanford Research Institute (SRI) in the early 1960s. Founded in 1946
by a group of Californian industrialists in conjunction with Stanford University, SRI was
located in Menlo Park in the high-tech region of Silicon Valley. During its “take-off-days” in
the second half of the 1940s, the consultancy focused on military and technical equipment.
Operating worldwide branch offices in Washington D.C., London, Zurich, and Tokyo, its
mission up until today is to “promote and foster the application of science in the development
of commerce, trade, and industry”. But SRI not only specialised on technical issues. It also
became known for the working on company strategies and the implementation of the
necessary technical, administrative, and organisational facilities in government and
commercial business. Thus, since 1958, the institute offered a “Long-Range Planning
11 Kogut and Parkinson (1993: 192) also underline the fact that at the same time “some of the widespread imitation of American firms was driven by attempts of European firms to compete in the United States”.
- 112 -
Service” (LRPS), which focused on the economic changes and their consequences for the
individual industries. In 1970 SRI separated from Stanford University because of its “excess
weight” with 3.000 employees at the time.
One of the reasons why Henkel preferred SRI might have been its more technical orientation,
which was more familiar to the background of the company and its management. Another
reason could lie in the fact that Henkel did not want to put its cards completely on the table.
Because of the SRI’s academic background and non-profit-status at that time, Henkel might
have expected a more sensitive and discrete treatment of the company’s affairs. Whatever the
reasons, Henkel commenced its co-operation with SRI in May 1963. The consultancy
arranged a meeting on “company planning for industrial growth” for the members of the
executive board in Düsseldorf. Subsequently, the company issued and circulated an internal
paper on the purposes and methods of long-range planning. It contained detailed instructions
on the approach to follow. First came an advanced analysis of plants and markets, followed by
the determination of profit targets. Profit component planning was next, i.e. the overall target
had to be broken down into objectives for markets, products, and investments.
To implement such an approach, in 1966 Henkel established a department for long-range
planning (LUP), which was to create planning cycles for the Henkel group at home and
abroad. The underlying objective of these efforts was to achieve a better “transparency” of
the entrepreneurial risks. Against the background of growing competition, LUP was designed
to help “recognize the market of tomorrow and its determining factors”. However, Henkel
apparently found it difficult to carry out these changes internally. In March 1966, the
company therefore contacted the SRI office in Zurich and asked for support “during the
realisation of planning activities in our company”. Henkel hoped that SRI would facilitate and
accelerate the implementation and operation of planning activities in the company.
3.3.4 The major SRI project, 1966-1969
SRI took up its work at Henkel with a team of four consultants at the end of October 1966.
Their efforts concentrated on the systematic set-up of the LUP, long-range company
strategies, diversification of activities as well as information systems and information
steering. In addition to developing the framework of “a strategic plan for the future
development of the company as a whole” SRI was supposed to present “an organisational
- 113 -
structure of the corporate headquarters”. By implementing these management innovations
Henkel hoped to “meet the growing and changing demands made on the management”. The
whole consultancy project can be subdivided into several phases: phase I from autumn 1966
to spring 1967 provided a company analysis; phase II from spring 1967 to autumn 1967 dealt
with strategic planning; phase III in the summer of 1968 saw the implementation of the
planning system and organisational changes; and phase IV which lasted until the end of 1969
was used for the supervision of activities after the main work had been done.
3.3.4.1 Phase I: Diagnostic The first phase of the project was “more diagnostic” than “therapeutic” and was to serve as a
starting point for drafting strategies. During a three-month-period “a general analysis of the
company’s situation” was carried out, dealing with the market situation, the mix of products,
the geographical spread, its financial viability, business policies and plans as well as with the
company’s management concept and controlling systems.
According to the consultants, Henkel’s strengths were its market position in Germany and its
human resources policy. SRI particularly felt that the company’s sound marketing experience,
its highly developed technology, and its “excellent r&d capabilities” provided numerous
possibilities for diversification. By contrast, the consultants criticised the lack of coordination
and systematisation in the company’s structure, operating activities, and long-range
orientation. To achieve long-range goals, SRI considered “improvements” in the areas of
planning, profitability, and efficiency of the top management “indispensable”.
3.3.4.2 Phase II: Developing company strategy and planning The second phase started in May 1967. It concentrated on the development of a company
strategy and the implementation of the long range planning in the individual business
functions of the company. SRI determined some “key problems” concerning products and
markets, operational processes, the attitude of the company’s management and “particularly
[...] of the owners”, which had to be solved before an a planning system could be
implemented. Thus “the drafting of the company’s operational plan and its corporate
development plan” which represented “the practical implementation of the long-range
corporate planning” did not commence until summer 1968. The implementation of long
range planning was seen as a precondition for the further expansion of the Henkel group and
- 114 -
had to integrate all business units. Whereas all questions concerning long range planning were
to be discussed by top level of management, the realisation of the planning projects was
delegated to planning representatives in each function and unit. To prepare them for their
tasks, SRI trained these representatives in special planning methods and techniques.
However, before implementing a planning system, the company needed to develop a
corporate strategy as a framework for its future growth. In July 1968, at the request of Konrad
Henkel, SRI submitted a strategic plan, which listed the company’s goals and missions. It also
discussed the tools necessary for realizing these ideas. The formulation of Henkel’s “business
character, mission and goals” was to direct the company’s business policy over the years to
come and was to set a standard for further business ventures. These basic statements on the
company’s character, formulated in 1968, were to be seen as a supplement to the company’s
standing rules and were based on the premise that Persil/Henkel would be considered “as an
integrated whole”, be managed “as an international company”, and “be brought to achieve
very specifically set profit targets”.
With respect to the internationalisation of business activities, SRI had the impression that
Henkel was “undecided about its future corporate character”. In order to answer the question
“what the company wanted to represent in the future”, profit expectations, the level of
internationalisation, and the company’s self-image as a family firm were to be factors of vital
importance. The head of the company, Konrad Henkel, ensured the observance of the
company’s mission. He exhorted all members of the management “to review each project to
ensure it matches the corporate mission and business target”. The contents of the company’s
development and operational plans were also oriented towards these guidelines, yet the paper
was not meant as an “irrevocable dogma”, but was supposed to enable “adjustments to a
changing environment”.
Subsequently, in July 1970 SRI proposed modules for a corporate strategy, which were seen
as the framework for the individual divisional strategies. They contained guidelines on the
company’s future potential in terms of market opportunities, production capacities, human
and financial resources, and foresaw a stronger focus on “non-detergent” activities and the
setting up of regional centres of development. According to SRI, Henkel had for too long
stuck to the goal of a 50 per cent market share for full detergents. This, the consultants
argued, would not be sustainable in light of expanding international competition.
- 115 -
Furthermore, the concentration on traditional markets and portfolios bore a high risk, as one
had to reckon with the fact that new competitors would undertake diversification efforts in
this direction. Thus SRI recommended that Henkel adopted alternative measures to give “new
products and markets a chance”. Such measures included diversifying into other consumer
goods industries such as food, cosmetics, or disposable products, which were strongly related
to Henkel’s operative businesses.
Yet the consultants criticised Henkel‘s “obvious lack of diversification guidelines or
programmes” which led to the fact that “each opportunity [was evaluated] on a case-by-case
basis” and promising possibilities were rejected “because of the high capital investment
needed”. In SRI’s estimation, “the company’s fundamental decision to limit debt financing to
a minimum, the lack of shares which could be exchanged in the event of making an
acquisition, and an aversion against participating in joint ventures and cooperations with other
companies had hitherto clearly inhibited Henkel’s diversification activities”. The consultants
tried to convince their client that a successful diversification into new markets did not
necessarily require full ownership and sufficient investment capital. They recommended
entering into cooperation projects and joint ventures, since Henkel, due to its technological
superiority, would be able to “keep control”.
SRI also recommended that Henkel implement scientific management techniques at the
production level, which were already extensively used by “leading U.S. producers to achieve
the optimal combination of production factors and maximisation of profits”. Such techniques
for measuring and monitoring work productivity, for simplifying work procedures, for
optimising the distributive function of warehouses, and for cutting back production and
material costs through the use of EDP, Operations Research, systems engineering, and
industrial engineering had hitherto apparently only been used by Henkel to a limited degree.
The function “production/engineering” was supposed to support all the firms within the group
in adopting rationalisation measures and was to “provide group-wide advice on the newly
generated branches” in order to “maximise usage of machines and plants, premises, work
force, and investments.
With regard to Henkel’s brand marketing, SRI became a transmitter of new trends from the
United States. The consultants considered the significance of the marketing of packaged
consumer goods in the US for future marketing structures in Europe, and especially in
- 116 -
Germany, as being very high. SRI informed Henkel not only of the distribution channels and
of the competitive consequences of the concentration tendencies among the retailers; it also
provided an evaluation of marketing trends concerning trademarks, as opposed to
manufacturer’s brands. This was of particular interest to Henkel as the company had hitherto
always blocked the creation of trademarks.
In the field of sales, SRI encouraged Henkel to concentrate much more on research
possibilities “outside the laboratory”, for example by conducting market research, in order to
keep up with the competitors. This was seen as an urgent necessity since Henkel had yet to
develop an efficient marketing strategy for foreign markets. Its close contact to regional
markets was seen as being of decisive importance since consumer habits differed from
country to country. To exploit these growth potentials the group had to pursue “a standardised
marketing policy and an improved information policy [...] in order to respond quickly to the
trends on the individual markets”.
Source: HA 251/1, SRI, Implementation of a binding long-range planning for Henkel/Persil, Phase I, April 1967
Although Henkel’s foreign detergents sales were growing considerably, the sales revenues
remained relatively small, since company’s foreign market shares were far below the level
achieved in the German market.
Henkel, Market Shares in Heavy Duty Detergents in Europe in 1966
0
50
100
150
200
250
300
350
400
450
500
W-Germany Italy Austria Netherlands Belgium Spain Switzerland Danmark Sweden
in M
DM
- 117 -
Source: HA 251/1, SRI, Implementation of a binding long-range planning for Henkel/Persil, Phase I, April 1967
The unsatisfactory performance of Henkel on foreign markets resulted, according to SRI,
from the fact that market entries often “required a considerable level of marketing
investments”. Because of its lack of investment capital, Henkel had hitherto “not given
sufficient prominence” to a number of markets such as France, Great Britain, the USA, Japan,
Canada, and Australia.
In general, SRI considered a qualified top management as one of the preconditions of the
efficient implementation of its recommendations. But the consultants as well as several
members of the company’s executive management worried about the lack of management
trainees, because the company “obviously did not train qualified staff in advance” and did not
dispose of a management development system. SRI recommended “on-the-job training” for
forthcoming top managers such as job rotation, participation in planning activities, and the
assignment of profit responsibility since the academic training of managers-to-be in Germany
“placed emphasis on merely the scientific subjects, to the exclusion of practice-oriented
business management”. However, it was not before the middle of the 1970s that Henkel
nominated management trainees and developed individual career plans and job rotations to
broaden the insight of the trainees into different business units.
Henkel, European Heavy Duty Detergents Market, Sales revenues in percentage, 1966
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
W-Germany
Italy
Austria
Netherlands
Belgium
Spain
Switzerland
Danmark
Sweden
in p
erce
nt
- 118 -
Moreover, the owner family was supposed to delegate managerial functions, especially with
respect to decision-making processes. Hitherto “too few people” had tried “to make decisions
in too many fields” with the result that “members of the company’s central management are
completely overworked”. The reorganisation measures had already taken this circumstance
into account: the establishment of a central executive management made it possible for the
directors to deal intensively with “the true questions of corporate policy” such as issues
independent of day-to-day business.
Due to Henkel’s strong hierarchical structure, the company did not fully exploit “the strength
and expert knowledge of its middle management”, a factor which SRI assessed as being a
major weakness. According to the consultants, an efficient management of growing
enterprises required more transparent forms of delegation, communication, and information,
whereas Henkel suffered from a “lack of communication throughout the whole company”. In
their view, “the secrecy of information might have been justified during the late 1940s and at
the beginning of the 1950s. Currently, however, it was responsible for insufficient
management performance”. Criticising the “established official channels”, they called not
only for “a freer communication” among Henkel’s top managers but also for a better
coordinated “management information”. To this end, more easily accessible channels of
communication were to be established throughout the whole company.
The company made some efforts to implement these suggestions. Thus, the number of
meetings and conferences bringing together top and middle management increased. As
Konrad Henkel observed, these meetings were something “totally new” and provided the
opportunity “to discuss factual issues and ensure a sufficient level of information on both
sides”. Following his suggestion, a workshop on in-house information was set up in the
summer of 1969, in order to develop detailed ideas for improving the communication between
the top management and all other levels of the company. However, it took much longer to
make more substantive changes. The first executive manager of the KGaA who was not a
family member, Helmut Sihler, was only appointed in 1980. And Henkel was still busy
delayering hierarchies in the 1990s.
The financial policy of family-owned companies was traditionally geared to staying
independent of the external influence of banks. Internal financing was thus of high importance
for Henkel, because “a wrong investment and expansion policy” could have hindered “the
- 119 -
possibility of further self-financing”. The line taken was that the equity capital of the group
worldwide was not to fall below 40 percent. This requirement mirrored the “risk-aware
attitude of a family firm”, as most German chemical joint-stock companies had an equity ratio
of below 30 percent. About 70 per cent of Henkel’s annual profits were supposed to serve as
“the substantial source of financing to sustain the present position”, whereas loans provided
by the owners or public utilities were preferably to be used to fund expansion activities rather
than turning to “long-range loans provided by banks, insurances, or other institutions”. The
latter were also to be kept as low as possible in future, unless they were considered “essential
for the company’s continuity or the profitable establishment of a significant new business
portfolio”.
As the policy of spreading risk through product and geographic diversification could not be
accompanied by short-term profit maximisation, SRI particularly identified the ownership of
shares by non-family members as a significant factor determining the future course of the
company in the long run. In the light of the general directive “to only use a minimum degree
of debt financing”, the restricted availability of investment capital for expansion activities was
bound to represent an impediment for the implementation of the company’s strategic
guidelines. SRI recommended that at least parts of the business be transformed into a public
joint-stock company. It took almost two decades for the owner family to make significant
steps in this direction. In 1976, Henkel & Cie. GmbH was changed into a “limited partnership
on shares” (KGaA) and ten years later the company went public. However, only preference
shares without voting rights were issued.
3.3.4.3 Phase III: Divisionalization The third phase, which started in the summer of 1968, dealt with the implementation of the
planning system. Henkel sent staff members to SRI seminars in California to get informed
about the constituent elements and the practical operation of company planning. The
attendance aimed at the procurement of “practical suggestions on methods, training
techniques and organisation of LRP” as well as at information on aims, growth,
diversification and acquisition activities of the company.
Since an efficient organisational structure was also considered to be a basic condition for the
successful expansion of the company, SRI was asked to submit a proposal for a new
- 120 -
organisation. Thus, one of the main results of the consultancy intervention was the
implementation of the divisional organisation. Since its foundation, the company’s
organisational structure had grown more or less unsystematically, parallel to the functional
expansion of the group. As of 1947, Persil GmbH functioned as a holding company and was
charged with controlling and administrative tasks, whereas its associated company, Henkel &
Cie. GmbH, remained in charge of running the production plants.
The multidivisional structure or M-form can be traced back to the 1920s, when a number of
American corporations decentralised their activities along product lines. Whereas the M-form
had been almost unknown in Germany up to the 1950s business, 50 out of the 100 largest
German firms had already adopted it by 1970. As SRI told Henkel in 1969, the divisional
structure was “newly” picked up by companies which show “a wide production program and
work a multitude of markets”. A divisional organisation was seen as an efficient base for
management delegation, since each division was run as a profit centre, individually
responsible for product development, r&d, production, and marketing. Thus in the spring of
1969 Henkel replaced its functional structure with a divisional organisation. It had six
divisions according to the product groups inorganic products/adhesives, cosmetics, foods,
house care products, organic chemicals, packaging and detergents, each of them covering
markets at home in Germany and at the European level.
The company as a whole had a number of internal service functions such as
finance/accountancy, research/development, logistics, organisational/scientific management,
personnel and social affairs, production/engineering, law, and corporate planning and
development. The functional units encompassed consultative and coordinating tasks and were
responsible worldwide for setting guidelines for the associated enterprises of the group. The
regional function meant taking care of overseas business whereas the Henkel subsidiary
Henkel International was entrusted with the European business. As a special field of executive
management, six staff positions were established which supported the headquarters on issues
such as “contact to European industries” or “International public relations” and underlined the
company’s international standing. In doing so, Henkel failed to follow completely the SRI
proposals, which had suggested eight divisions, nine functions, and two regions. The reason
for this was the necessity of transitional solutions in some cases. Thus “double divisions”
were implemented temporarily with the “final goal” to fully implement the organisational
principles proposed by SRI.
- 121 -
The “product-group” organisation of the Swiss Geigy Group, implemented in January 1968,
had obviously served as a model for this organisational structure. Since “[...] the situation
which had brought about Geigy’s reorganisation was [similar] to the one we are currently
facing”, Henkel had started an exchange of experience with the Basle company at the
beginning of June 1968. Geigy, which had been advised by McKinsey during the
implementation phase, had characterised its reorganisation as “the most important and
beneficial decision since the founding of the company”.
SRI emphasized that there was no “general formula” for the organisation of a company, but
that it was to be created “in consideration of the particular conditions” (product range,
markets etc.). Thus, the first step before the implementation of the new structure was the
“divisional coordination” which was realized “at once without any organisational
amendments”. All firms belonging to a division were to pursue a “concerted policy which
concentrated on the division’s goals”. This was to train the “thinking in divisions” which was
supposed to address the most important issues of the restructuring. The implementation of the
divisions was then relatively uncomplicated, because the existing subsidiaries already worked
within the scope of the new divisions.
Spartenorganisation 1969
Henkel GmbHZentral-Geschäftsführung (ZGF)
Dr. K. Henkel, Vorsitzender Dr. W. Manchot Prof. Biedenkopf Kobold Malitz Dr. Sihler Dr. Werdelmann
Anorga-nische
Produkte/Klebstoffe
S-AK
Kosmetik
S-KOS
Organ.Produkte
S-OP
Ver-packung
S-VP
Wasch-mittel
S-W
Wohnungs-pflege-
mittel u. Nahrungs-
mittel
S-WONA
Finanzen/Rechn.-wesen
F-FR
ForschungEntwick-
lung
F-FE
Logistik(Einkauf/
Transport/Lager)
F-LOG
Organisa-tion/
Wissen-schaftl.
Unterneh-mensführ-
ungF-OW
Personal-und
Sozial-wesen
F-PS
ProduktionIngenieur-
wesen
F-PI
Rechts-wesen
F-RE
Außer-europ.Länder
R-HI
Stabstellen
PublicRelations
ST-PR
Unterneh-mensplan.
u. -ent-wicklungST-UPE
ZGF-Sekretariat
ST-S
Revision
ST-R
Industrie-Kontakte
ST-IK
Henkel & Cie GmbHEuropa
Henkel International GmbHÜbersee
Sparten Funktionen Region
- 122 -
As a result of the reorganisation, Henkel GmbH, together with all its subsidiaries and
portfolio companies, was treated as an “integrated whole”: all firms working within a
particular segment were to pursue a common policy orientated to that segment’s objectives.
Moreover, in the opinion of Henkel’s management, the divisional structure supported “the
growing international orientation of the company’s objectives in the future” since it “placed
the newly developed research-driven and market-demand-oriented product […] at the centre
of efforts geared to activities in the international markets”.
Seen in the long run, however, the divisional structure succeeded only partially. The different
divisions competed with each other for the opening of new markets. For example, the
chemical division protested against the expansion of the cosmetic division, because it worried
about the loss of transactions with big customers such as Beiersdorf or Schwarzkopf. As a
consequence, in the second half of the 1970s the divisional structure was modified by
transferring the divisions to new business units.
3.3.4.4 Phase IV: Ongoing support In the fourth phase, which lasted from June to December 1969, SRI provided the company
with ongoing support in all its planning activities and also submitted recommendations for the
expansion of the company’s non-European businesses. In detail, the consultants were given
the tasks to (i) support Henkel in defining its core objectives and operational targets, (ii)
outline its business strategies and operation plans in order to open new portfolios, and (iii)
supervise the expansion of the company’s business outside Europe.
Henkel made considerable efforts to implement the changes and institutionalise the
innovations in planning, strategy and organisation. In March 1969, an organisation committee
(“Organisationsausschuss”) was formed in order to oversee the implementation of SRI’s
recommendations in the different divisions and functions. Henkel also created internal
advisory departments in several divisions and functions to help with the implementation
process. In 1970, the planning activities passed from LUP to a new business function, UPE
(F-UPE). The new unit also dealt with market entry projects, including “scents and flavours”,
“adhesives USA”, “body care products Italy”, “food/healthy food”, “paints and finishes” as
well as “disposable products”. Since 1972, it was supported by a “committee on
diversification activities” (DIA). This was to guarantee a more effective and systematic
- 123 -
organisation of the diversification efforts. These efforts concerned, for example, projects “for
research, production or sales” of animal feed additives (fats and emulsifiers), aromas for
cosmetic products, home and plant care products, but also health care products and pet food.
In the end many of these projects were not realised. Apparently, the most important lesson
Henkel learnt from these efforts was that one should “stick to one’s core fields of expertise”.
SRI did not terminate its activities completely after the end of Phase IV. It continued to
provide advice to the company until the end of the 1970s. J. Cavender, one of the consultants
who had been involved in the project since the beginning, came to Düsseldorf several times
each year for some weeks during the 1970s. For example, in 1972 he worked on topics such
as corporate communications, administration and controlling of acquisitions, as well as more
general organisational questions.
In general, Henkel displayed a remarkable openness towards the recommendations made by
the consultants, despite the fact that some of them represented a considerable break with
Henkel’s tradition. In the opinion of SRI, the company showed an “encouraging willingness
to adapt its management structures to the new requirements arising from a changing
environment. Thus, the Henkel board agreed to “most of the strategic suggestions which had
been made by SRI for the single units”. However, in most cases it took several years until the
detailed measures based upon SRI’s recommendations were adopted. For example, a “long-
range corporate strategy” was only defined in 1977. Subdivided into products, product
quality, product markets and regional markets, production, r&d, financial resources,
management, human resources, and associated companies, this strategy covered all central
fields of business policy.
In some instances, the recommendations SRI submitted to Henkel were ahead of their time by
more than 20 years. In the light of the expected growth of the European markets SRI had
already suggested in the 1960s that “a second plant analogue to Holthausen be set up
somewhere in the EEC”, which was to effect cross-border production. As of the 1970s,
Henkel started joint ventures and strategic alliances which had been suggested by SRI, but
strongly rejected by the company up until then. One of the first examples of this is Henkel’s
cooperation with the Clorox company in Oakland/USA, in 1974. Henkel had realised that “not
all goals [...] [are] to be realised by oneself” but by way of so-called “partnership strategies”.
- 124 -
The opening of new financial resources, also a subject of the SRI-project, was realised in the
mid 1980s when Henkel finally went public.
At the same time, some of the changes introduced in the 1960s did not last. For example, the
planning activities initiated by SRI became more difficult in the 1970s. In retrospect one can
say that “not all intentions and plans” were realised, some developments did not turn out as
expected, and some decisions proved to be wrong. Thus on several occasions Henkel started
into a business venture, “without properly assessing the scope of the task ahead of us”. Losses
such as those made in the French brand-article business or in parts of the German cosmetics
business were the consequence. Henkel board member Helmut Sihler, speaking before the
family meeting at the end of 1978, warned against exaggerated expectations of the company’s
“planning philosophy”. “Planning”, he argued, did not mean “prognosis” but the making of
“the right well-timed decisions for the future”. “The value of planning systems”, he said, “is
not only to be measured in terms of having achieved the forecast figures but if such planning
has actually been conducive towards making decisions for the future”.
General economic factors such as the oil crisis, inflation, and the economic stagnation
experienced in the 1970s and 1980s led to the modification of strategic and planning
requirements. When Henkel’s return on capital decreased from 15.7 per cent in 1970 to 13.9
per cent in the following year, the strong discrepancy between target and actual profits
became obvious. Because of the recession and increasing costs, the group’s performance of
7.8 percent in 1972 represented the lowest sales margin since 1959. Henkel now had to
assume “that the present level of activities are not sufficient to achieve the growth-rate targets
specified in the corporate goals”. Gradually, SRI seems to have lost the support of Henkel’s
top management. Thus, at the end of the 1970s J. Cavender complained “about the inadequate
information flow between myself and the executive management; written and verbal”. He
found it difficult to consult “when one does not have the opportunity to give comments to the
central management in any of its meetings”. From the end of the 1970s there are no further
hints on the appearance of SRI at Henkel. The consultants, nevertheless, had left a very strong
imprint on the company.
3.3.5 Conclusion and outlook
- 125 -
The German family firm Henkel, which will celebrate its 125th anniversary in 2001, belongs
to the big international suppliers of consumer chemicals. It is probably not exaggerated to
conclude that the consultancy firm SRI created many of the preconditions for the process that
ultimately turned Henkel into an internationally diversified company in the aftermath of the
Second World War. The SRI consultants assisted the company in the formulation of a
business mission, the drafting of a corporate strategy, the development of planning systems,
the divisionalisation of the corporate organisation and the diversification of business
activities. They also made suggestions regarding production, sales, finances, and human
resources. Based on these recommendations, Henkel began to diversify geographically,
developed new product portfolios, introduced a divisional organisation, revised its financing,
and modified its personnel and public relations policies. The co-operation with SRI during the
second half of the 1960s can therefore be seen as one of the most decisive management
offensives in Henkel’s development after 1945.
Even after the end of the co-operation with SRI, Henkel had a lot of work for other
consultancy firms, given the difficult economic climate during the 1970s and 1980s, the
company’s international expansion, and its activities in new market segments. McKinsey ran
cost saving programmes on a quasi regular basis since the 1970s. In the 1980s the Boston
Consulting Group (BCG) also appeared in Düsseldorf. Following a period of continuous
expansion, the most important challenges of the 1980s were the reduction of complexity and
bureaucracy, and the globalisation of the core businesses. With regard to the necessary
business expansion and to protect competitive advantages BCG recommended to reduce the
dependence on the European business and to globalise the successful divisions. BCG
subdivided Henkel’s core competences in chemical businesses, brand articles and fats and oils
and worked out specific strategies for each of them. The creation of the single European
market by 1992 prompted Henkel to look for new ideas for bundling production and
optimising business locations. The company followed BCG’s “Euro-plant concept”, built
around a “basic international supplier function” of the individual business locations which
were to be specialised according to their technological expertise. These individual “centres of
competence” were to transfer their know-how in production, process engineering, and
marketing to other business locations via “roll outs”.
All in all Henkel’s corporate policy, initiated by American consultancies in the late 1960s,
stood the test of time. “Carefully planned diversification from within” and the risk-aware
- 126 -
financial policy can be seen as Henkel’s distinctive characteristics. At the end of the 1970s,
Henkel boasted a well-balanced portfolio mix both in terms of brand articles on the one hand
and chemical products on the other as well as in terms of foreign and domestic business. This
twin-track strategy, generating growth through sector-based diversification and the
internationalisation of activities, particularly paid off in the light of the series of crises (energy
crisis, inflation, current account deficit) experienced as of the 1970s, when Henkel put up a
better performance than any other chemical company in Europe. Henkel has been well
prepared for the challenges of globalisation by the far-sighted corporate policy developed in
co-operation with American management consultants since the 1960s.
- 127 -
3.4 Human Resource Management in Italy (Cristina Crucini)
3.4.1 Introduction
This chapter aims at analysing how a specific consulting practice, in this case Human
Resources, has evolved from the 1950s in relation to the specific conditions and pressures
exerted by the Italian systemic context. Italy appears particularly interesting as a case to
examine in this respect. It is a country where American management ideas had a significant
influence; in this process, consultancies of U.S. origin or Italian consultants with American
connections have been playing an important role ever since the 1950s (Faliva and Pennarola,
1992; Crucini, 1999/2000). Nevertheless, the Italian consultancy market continues to be a
heterogeneous reality composed by very different consultancies, maybe reflecting the
“diversity” or “specificity” of the Italian context emerging from economic and business
history, as well from management studies on Italy.
The management consulting field in Italy initially evolved along two main streams, the first
one connected to the scientific management and the second to accountancy; between the two,
scientific management was undoubtedly the most popular. Similarly to what happened in the
US first, and in Europe later from the 1920s onwards, also in Italy the early history of
management consulting focused around work-methods improvements in factories. Bedaux
opened his Italian branch in 1927, chronologically second in Europe (contemporary to the one
in Germany) after the first one opened in England in 1926. In 1931 twenty-one plants in Italy
employed the Bedaux system, and their number grew to forty-nine in 1937 (Kipping, 1999).
Already in 1929, the Bedaux system was being criticised by workers and trade unions
claiming that “it did not represent a benefit for the national production” (Sapelli, 1975:120)
and in 1935, together with other methods of work intensification, it was banned from Italian
factories by the fascist regime (Crucini 1999). In spite of this, it seems possible to say that the
focus on production and consequently on those methods that could help saving resources, has
represented a main issue in the history of Italian industrialisation. Some Italian historians
have pointed out that in Italy Taylorism was in fact mainly seen as a kind of “authoritarian”
means for the control of both costs and workers, resulting in the predominance of the
productive function above all the other components involved in work organisation (Sapelli
1997, Bigazzi 1997). This situation seems also to have had a significant impact on the
- 128 -
evolution of Human Resources Management as a practice in Italy. In fact it has somehow
shaped the contents of this practice for almost twenty years (1950s and 1960s), focusing
around shop floor-related problems and production related aspects and thus delaying the
diffusion and implementation of other practices.
This chapter focuses therefore on the historical evolution of Human Resources practices in
Italy and on how this process was influenced by the specificity of the Italian context in which
it developed. Attention will be focused on the evolution of Human Resources practices in the
last fifty years, and on the role played by the “thoughts and actions” of some pioneers in the
development of this field, trying also to relate such developments to the wider case of
management consulting in Italy. Human Resources Management, more than other
“standardised” consulting practices, such as for example Information Technology or Total
Quality Management, appears more country-specific and less homogenised. Human
Resources Management can in fact be included in that group of activities that are “encoded
into people’s actions”, resulting more flexible and leaving more space for adaptation to the
surrounding environment, given that both the background of the consultants and the clients
might influence its contents (Crucini and Kipping, 2001). For these reasons, this analysis at
“micro level” (meaning a specific practice) might enhance the understanding of how the
systemic context has actually shaped the consulting field in Italy, which consequently results
somehow embedded in it.
In order to support the assumptions stated above, besides referring to the existing historical
literature on work organisation and management consulting in Italy, this paper will include
the professional history of one of the Italian pioneers in this field, Silvano Del Lungo.12 His
case appears in fact particularly representative in this respect, given the range of experiences
in which he was directly involved. His educational background and first professional training
took place soon after WWII, a period characterised by the coexistence of a rather closed
University world and the cultural influences coming from the US through the Marshall Plan.
He was among the first social researchers in psychology of work, specialising in the study and
application of time measurement techniques (with respect to piecework), in performance
measurement, in personnel selection and work organisation. In addition, Del Lungo was
12 This is work in progress from the author’s PhD research on the evolution and role of management consulting in Italy, funded by the CEMP project. The author gratefully acknowledges this support and would also like to thank Silvano Del Lungo for his help for this part of the research.
- 129 -
involved in some of the first selection and professional training initiatives in Italy before
going into consulting, first as an employees and later setting up his own company in 1967.
Moving from Del Lungo personal experience and using his own recollections, as well as
various materials produced during the last thirty-three years of professional activity, this
chapter will focus on two main aspects. First, it will attempt at describing the evolution of
Human Resources practices, and of the consulting field whenever possible, in relation to the
Italian systemic context highlighting the influences shaping this process. Secondly, it will
also attempt at showing how the role played by some pioneers through their initiatives,
research and personal networks, actually contributed to the development of the Human
Resources field. In order to do so, this paper will first have a background section on the
evolution of work organisation in Italy up to the 1950s. The subsequent section will start
from the changes taking place from the 1950s onwards. It will also try to highlight the role
played by consultants (or other experts) in this process and focus on Del Lungo experience.
3.4.2 The background of the Italian work organisation
A number of business and economic history studies have pointed out that Italy was a
latecomer in the Second Industrial Revolution (Castronovo, 1980; Zamagni, 1990; Amatori,
1997). At the beginning of the Twentieth century, the Italian industry was characterised by
few large groups, a very small domestic market with low competition and territorial
unbalances between the North and the rest of the country. It was only after the Great
Depression and the subsequent economic crisis of the early 1930s, the isolation and autarchy
policy during the Fascist government and World War II that the Italian industry experienced
its real take off during the1950s.
For what concerns the evolution of work organisation in the Italian industry, the shift towards
the mechanisation of production systems took place from the beginning of the Twentieth
century, and as Pedrocco (1980:29) claims “to the development of mechanisation
corresponded a stricter exploitation of the working force”. In his study on the Italian
industrial organisation from Giolitti to Mussolini, he points out that the increase in
productivity in that period was accompanied by a decrease in production costs (with respect to
labour), and by a dequalification of the working force replaced by specialised machines and
tools. In 1915 Taylor’s work “The Principles of Scientific Management” was translated into
- 130 -
Italian. Scientific management was seen as an effective tool to reach an efficient industrial
organisation; in addition it was quite clear from the beginning that it also represented a
mechanism diffusing a stricter subordination of human to machines’ work (Pedrocco 1980,
Bigazzi 1997, Sapelli 1997). Because of its “scientific connotation”, tayloristic methods of
production had also a sort of “legitimising function” that could back up industrialists’
decisions with respect to job regulations.
World War I prompted a first big transformation in the Italian industrial system, as the
conflict imposed a significant expansion of production. These circumstances could have
represented a good chance to enlarge the limited borders of the Italian national market if
followed by a deep re-organisation of work methods and of management structures, but such
transformations did not take place (Sapelli, 1997:922). After the war, the need for radical
change in the national productive structure with respect to both technology (Italy was
backward compared to other countries) and the nature of the relationships between employers
and employees became increasingly necessary to maintain high levels of production also in
peacetime. At the same time, because of quite many elements implicit in the Italian
industrialists’ mentality, (paternalistic behaviour, dislike of delegation, propensity for
hierarchies, etc.), “the scientific organisation of work appeared as the most appropriate tool
for such needs” (Pedrocco 1980:42). These considerations might explain why work
organisation in Italy was, still at the beginning of the 1950s, characterised by bureaucratic and
technical-scientific connotations rather than by more conscious and effective organisational
concerns (Sapelli 1997).
On the other hand the “taylorization” of production started to stimulate some concerns about
the possible deskilling of workers in the long-run, as the majority of them was more and more
excluded from an active involvement in the production process. Besides, war production had
led to an increase in low-skilled work (through female and minor employment). The
scientific organisation of work needed indeed the presence of new production technicians,
thus the issue of “an optimal utilisation of human resources through careful selection and
promotion processes” (Bigazzi 1997:955) started to arise more and more frequently. In other
words it started to be felt as necessary to observe the individual characteristics of workers, in
order to allocate them in the part of the production process in which their skills could be
maximised. In order to achieve such results it was first of all necessary to promote and
diffuse a general technical-professional education which, combined with the training on the
- 131 -
job and similar learning mechanisms provided within the working environment, could allow a
real change in the production organisation. As observed by Sapelli (1997:629) “a country
economically backwarded like Italy could not catch-up with the more advanced ones without
creating a wide and organic scientific and technological educational system […] that required
an active and systematic involvement of the State”.
A first attempt to break away from the predominant “productive approach” linked to taylorism
within Italian firms had been carried out by Adriano Olivetti, through a series of initiatives
attempting at promoting the firm as a “social place”. In his idea, the firm was “the ideal place
for development and transformation processes, […] an experimental lab for new cultural and
scientific values” (Castronovo, 1997:1283). Surrounded by a group of engineers and social
scientists Olivetti was trying to achieve a “humanisation of the work” (ibid.). In order to do
so, he invited a group of social scientists led by Cesare Musatti to set up, within Olivetti, a
Centre for the Psychology of Industrial Work (Centro di Psicologia del lavoro industriale).
The centre was a research reality endowed with specialist libraries and classrooms aiming at
merging industrial activities and cultural development within the working environment of the
firm. This experience though, remained rather an isolated experiment and was not neither
fully understood or reproduced anywhere else in the Italian industrial environment of the
time.
Starting from the end of WWII, concepts such as “human factor” started to be used to indicate
the need to reshape the scientific organisation of work taking into account the “human
relations” theories, as if, someone argued, there existed “non-human relations” (Bigazzi,
1997:963). In spite of this, the Marxist component in the Italian culture was still impacting on
most of the practical applications of the social sciences, generally “condemned under the label
of American ideologies” (Castronovo, 1997:1286). Generally speaking, the initial
backwardness of the Italian industry, the specific connotations of industrialisation process, as
well as the general social and political situation of the country at the time exerted an influence
on the development of work organisation. Only slowly therefore, the diffusion of American
organisational and management theories, as well as other foreign influences and “models,
could take place in post war Italy.
Trying to interpret the main features of work organisation in Italy up to the 1950s, it seems
possible to say that besides efficiency concerns, the predominance of scientific management
- 132 -
methods appears strongly linked to the need of “controlling” the workforce as well as of
“legitimising” the role of entrepreneurs. These facts might be also interpreted as an attempt,
done by industrialists, to conceal their “paternalistic” and authoritative inclinations under the
flag of efficiency. At the same time, it seems also possible to say that even the later attention
for the “human factor” was indeed linked to the will of maximising the effects of tayloristic
efficiency. Starting with education and training of workers, the work organisation in Italy
slowly shifted attention from production only to include a focus on human resources
selection, training and qualification. As a result, slowly from the end of the 1950s, human
resources emerged as a new and independent area of interest for the management of firms.
3.4.3 The development of Human Resources since the 1950s
The first significant innovative practices in the Italian organisational culture started to appear
from the 1950s. In fact, on a general level, “during the 1950s and 1960s Italy, like all
European countries, found itself influenced by an influx of technology and managerial
methods imported from the great US corporations” (Zamagni, 1993:349). The American
influence in Italy appears strong in this phase, the main reasons being related to the Marshall
Plan and those initiatives such as productivity missions, training programs, and exchanges of
managers between Italy and the US. These initiatives played a major role in spreading
modern, “efficient” methods of management and production in Italy. In addition to this, the
first foreign consultancies started to operate in the country during these years and American
business schools became a model for the establishment of similar institutions in Italy (Crucini
1999/2000). For what concerns more specifically the work organisation, this phenomenon of
change was partly linked to the spread of the Human Relation theories during the 1950s, later
compared to the U.S. (where this had happened already in the 1930s) and again partly linked
to the Marshall Plan. As Sapelli points out, the Human Relations experience in Italy (with an
evident catholic component) represented a moment in the reconstruction process of the
management power within Italian firms and in the wider antisocialist and anticommunist
offensive (Sapelli, 1997:678).
Sapelli (1997:680) goes further identifying four main elements marking the renewal of the
Italian organisational culture of the time. Firstly, the setting up of institutions and
organisations, under the direction of professional or trade unions associations, for the study of
the problems connected to the management of firms. Secondly, the institution of
- 133 -
specialisation courses, held by universities and polytechnics, sponsored directly by some
industrial sectors interested in developing better selection practices within firms. Thirdly, the
foundations of institutes, directly by some industrial groups such as IRI, Finsider, Pirelli, etc.,
aiming at providing both a specialist preparation for new managers, as well as improving the
skills of the managers already employed. Last but not least, the emergence of post-University
institutes and schools, such as Ipsoa and Isida, aiming at analysing the organisational,
technical, administrative and social aspect of management.
These changes took place against the background of almost complete “closure” and
“immobility” that had characterised both the educational and working environment in Italy in
the previous years. Many of the new formative experiences of the time, including the first
management schools such as Ipsoa and Isida, had to clash against the conservative model
represented by Italian universities, which did not recognise the new schools as proper
educational institutions . In this “very closed world, where those trespassing the given
boundaries were looked at with suspiciousness” , Del Lungo was among the strange ones
especially given his interest for Psychology (the subject of his dissertation), a discipline that
did not yet exist as University degree. Del Lungo remembers how almost no sources and
books were available to students and researchers, while the first American sources (books and
journals) on this subject, as well as on other “new disciplines” like management-related
issues, were only available through the American embassy. According to him, this lack of
information was not completely compensated by the role of institutions like the Ford
Foundation, very active in promoting exchange of people between Italy and the US but not in
the diffusion of printed materials, which could have reached a wider number of people.
Outside University, another phenomenon starting from the middle 1950s was the growing
attention given to the field of “orientamento e addestramento professionale” or professional
orientation and training for workers. At the time, Del Lungo remembers, two different
institutions were involved in this process, with very different views and approaches. On the
one side there was Ministry of Education, the “conservative” component, claimed that the
work offer should have remained unaffected by the demand and most of all that aim of the
educational system was to form “men” and not “workers”. Therefore, professional orientation
was not considered as useful. On the other side, the Ministry of Work, which represented the
“progressive” component, aiming at using professional orientation as a tool for allocating and
training the working force in an optimal way (from interview on 19/12/2000). On this base,
- 134 -
in 1955 the Ministry of Work launched the “Legge sull’apprendistato” (Professional Training
Law), in order to integrate the workers’ educational experience with a specific professional
training linked to the working reality in which they would have operated. This new attention
for the “human factor” appears mainly related to two causes. The first one was connected to
the “Marshall Plan’s modernisation package” that included the Training within Industry
programme aiming at “introducing the logic and the style of human relations inside factories”
(Bigazzi, 1997:967). The second cause stemmed from inside the industrial world itself and
was strongly related to what has been previously mentioned about the increased
consciousness, among Italian industrialists, of the need of an optimal allocation of trained
workers.
It was through one of the initiatives promoted by the Ministry of Work that Del Lungo starts
his professional career. In 1956 he is selected to take part in a six months course for work
psychologists sponsored by ENPI (Ente Nazionale Prevenzione Infortuni) in Rome. This
course represented indeed a sort of innovative experience given that there was a basic lack of
tests on these topics and no centre of this kind existed in Italy at the time, with the exception
of the Centre of Psychology inside Olivetti. The main subjects taught in the course were Job
Analysis, Work Characteristics and Professional Profiles, Psychometric Psychology, and their
aim was to prepare both the so called “orientatori professionali” (those that would have
worked in the professional orientation process) and “selezionatori” (those that would have
worked in selection). In this respect it should be mentioned that these professions did not
exist before and were in the process of being created themselves. Selection in particular
started only from 1957, as before there was a law forbidding the selection of “operai comuni”,
that is to say the general workers without any specific qualification. In addition, if necessary,
the police provided information on people in the process of being hired (from interview on
19/12/2000).
An idea of the conditions, in which these first human resources practices evolved in Italy, can
be derived from the first professional experiences made by Del Lungo in this field. After the
course, he worked in ENPI Psychology School for two years (1956-57), mainly involved in
selection processes for large clients, given that they were increasingly in demand. In this
early stage, the selection activity was largely based on scientific tests including regression
techniques and optimal coefficient evaluation. One of the major problems that the first human
resources experts had to face was to overcome the diffidence and closure of clients. Del
- 135 -
Lungo remembers how, during his engagement in Palmolive, he was never allowed to visit
the plant for which he was selecting workers, and it took him some months before meeting the
person in charge of the hiring process and asking which roles the new employees would have
covered. This fact appears indeed quite “surprising” because, considering that Palmolive was
the Italian branch of an American multinational, it would have been possible to expect a much
more open and progressive attitude to external experts. A possible explanation is that the
national context and its limitations to a certain extent, affected even foreign companies. The
fact that, in order to overcome the working legislation of the time on personnel selection,
Palmolive had arranged a kind of “trick” hiring and firing workers the same day in order to let
them undergo the selection process, seems to confirm this assumption.
Differently from private companies, because of the State involvement, the large public
companies were “more open” towards the new initiatives involving human resources
practices. This attitude was mainly due to the fact that the top management in these
companies had a longer-term perspective to achieve goals and objectives, being “away” from
market pressures and “close” to the political power. At the same time, and maybe for the
same reasons, these same companies very often did not follow and implement the solutions
recommended by human resources experts. This was the case, in Del Lungo’s experience
with the Terni steelworks in 1957 and with Rai (the national Television Company) ten years
later (from interview on 19/12/2000).
The positive economic cycle of the 1950s and 1960s (with the exception of 1963-64) favoured
the growth of the national consultancy market and the arrival of foreign consultancies, mainly
American and French. At the beginning of the 1960s, American consultancies introduced two
main “innovation” in the Italian organisational panorama, the “M-form” and the “line-staff
distinction” (Faliva and Pennarola, 1992; Crucini, 1999/2000). At the same time, in order to
overcome the relative backwardness of the consulting field, Italian consultancies often set up
different kinds of co-operations with foreign companies. Many examples could be provided,
such as the Pietro Gennaro & Associati setting up a joint venture with the French Sema first
and the Boston Consulting Group later (Faliva and Pennarola, 1992; Crucini 1999/2000). In
the specific field of human resources Progredi was setting up a Human Resources company,
Loghea, and had chosen a French company as a partner, A. Vidal & Cie, which was
connected to the Centre de Psychologie Appliqueé in Paris. It seems possible to say that
French consultancies had what could be called a “cultural” competitive advantage in Italy
- 136 -
compared to Anglo-Saxon operators, as France was considered by Italian industrialists
culturally more similar to Italy than the United States, especially concerning managerial
knowledge and methods (Crucini, 1999/2000).
On the other hand, despite most of the human resources interventions up to that time had
focused around productivity issues, “the fundamental problem of shop-floor regulation had
remained unsolved” (Piore and Sabel, 1984:155). The often mentioned “paternalistic”
attitude of Italian industrialists (Gagliardi, 1997; Derossi, 1982) had prevented any serious
reform in personnel organisation and human resource management for a long time. Del
Lungo’s professional experiences in the early 1960s offer a quite comprehensive picture of
the main phenomena of the time. The employment at the Psychology Centre within Olivetti
(1960-62) represents a measure of how pervasive was the tayloristic approach even inside the
more “advanced” realities such as Olivetti, “where the factory, the psychology and sociology
research centre and the library where facing each other” (from interview on 19/12/2000).
Inside Olivetti Del Lungo was assigned to a specific task: checking the work organisational
aspects in assembly lines. In fact, Olivetti had adopted the scientific management principles
for its production procedures, which had shortened considerably the various phases of the
assembly process. On the other hand, for what concerned the piecework, the Bedeaux system
had been refused and replaced by an alternative one elaborated internally.
According to this system, once the production criteria had been established, a team of
“medium-high-skilled” workers called “allenatori” (trainers) would have tested them in order
to measure their times and use them as a base to “measure” the other workers. Because of
some doubts linked to this system and to the production organisation overall, the effectiveness
of these arrangements had to be checked. Results showed indeed the need of a partial re-
organisation of the work at the shop-floor level , but the recommended changes were only
partially implemented. This was partly because Del Lungo left Olivetti, partly because
despite its being a progressive and exceptional environment in the Italian industrial
environment of the time, even Olivetti was not unaffected by “some internal power logics to
which everyone had to adapt” (from interview on 19/12/2000).
Del Lungo subsequent professional experiences took place in consulting firms. In 1962
through an old acquaintance met at ENPI he was employed by Progredi, one of the largest
Italian consulting companies of the time. Reflecting the enlargement of human resources
- 137 -
practices that was taking place in the middle 1960s, the two most significant consulting
engagements made by Del Lungo in this period, differently form the previous ones, did not
involve production-related aspects but focused on problems more related with the workers.
The first one was a project aiming at measuring the “climate” of the working environment,
that is to say the workers’ satisfaction level on the base of parameters such as absenteeism,
complains, number of accidents, trade union affiliation, and so on (from Loghea internal
report). The other engagement concerned the analysis of the role of “capi intermedi”
(intermediary heads), a professional figure typical of the steel industry that had emerged from
the previously mentioned Training within Industry Programmes. These figures represented “a
communication channel through which, in a sense orders reach workers and on the other sense
the problems and needs of these last ones reach the top management” (Bigazzi, 1997:967).
In this first decade of activity (from the middle 1950s to the middle 1960s) the development
of the human resources field in Italy seems to maintain a sort of “individual dimension”.
With the exception of institutional initiatives such as those promoted by ENPI, all the major
developments in this field appear very much linked to a group of individuals. According to
Del Lungo, one of these individuals, “the long lasting effects of the first ENPI initiatives have
been to set up a network of people, some of whom became academics, some other expert in
the field, but all of them re-connectable” (from interview on 19/12/2001). These initiatives,
aiming at forming new professional figures, actually brought together a group of people with
different levels of expertise and educational background, who will continue to involve each
other in a series of initiatives promoting the development of this area. The first generation of
human resources pioneers, such as Del Lungo, Di Castro, Butera, Bontandini etc., grew
professionally through a series of common formational and professional experiences (e.g.
ENPI, Olivetti, Ifap, PGA). Given the closure of the environment in which they operated,
they maintained and enlarged their network over time, resulting in many cases in the
foundation of consulting firms or in their involvement in various institutes for management
education (Faliva and Pennarola, 1992). This networking trend, largely based on individual
networks, reflected similar and contemporary phenomena that were characterising the
development of the consulting market, as well as of the first management schools and
consulting professional associations in Italy (Crucini, 1999).
All these “consultants-researchers” had a common interest in the understanding of the social
and psychological dynamics displaying themselves in the working environment and had
- 138 -
studied texts and researches done outside Italy, where human resources theories and practices
were more advanced. Surprisingly, given that the human relations school had originated in
the United States, they did not only focus on the “classics” coming from the US, but also on
studies and researches done in Europe especially within the Tavistock Institute in London, for
example by the psycho-analyst Elliot Jacques. As for “real models” to follow, Del Lungo
remembers how especially Sweden was taken as a model with respect to industrial relations
and job organisation. At the same time he claims that most of these experiences were too
advanced for the Italian industrial situation, still very confused and turbulent in the late 1960s.
Because of this contingent situation, the first experts working in this area had a sort of big
power, as they were sometimes seen as “technical mediators among the conflicting parts, but
at the same time they had to operate under “unique conditions” requiring a continuous
adaptation of what was being experienced elsewhere” (from interview on 29/12/2000). This
is why, according to Del Lungo, the “school of thought” behind most of human resources
practices can be defined as “typically Italian, the creature of a specific time and context”.
After the individual “start-up phase”, the social changes that took place in the second half of
the 1960s compelled the industrial world to start serious reforms and favoured the growth of
management consultancies focusing on human resources management, as well as the range of
the services they offered. Among the Italian names there were Praxi 1965, Studio Staff 1967 ,
ORS 1968 and Prospecta 1969, in 1970 they were joined by Hay Management Consultants
and by other foreign consultancies, such as Egon Zendher, the first “head-hunter” company in
Italy (Faliva and Pennarola, 1992). These developments seem closely connected to the fact
that from 1969 onwards, when the power of personnel departments increased significantly,
the implementation of new organisational systems as well as the redefinition of working roles
started to be increasingly in demand. At the same time, they confirm once again the
backwardness of the Italian business organisation and the delay in the adoption of any
organisational changes.
According to Del Lungo, the conflicting nature of industrial relation in Italy had a significant
impact on the development of human resources practices, which up to 1970, were dominated
by interventions linked to the shop floor rather than to other organisational aspects (from
interview on 29/12/2000). In most cases, up to that time management consulting was a
synonymous of Bedeaux, with a few exceptions anticipating organisational and information
systems. In fact, the majority of the Italian companies of the time were “production
- 139 -
enterprises” in which “job” itself constituted the central element on which human resources
were organised, evaluated and remunerated. Roles were fixed, and these companies were
“internally immobile” (from interview on 29/12/2000). This is why the crisis investing the
tayloristic organisation of work at the end of the 1960s, mining the traditional conceptions of
work job analysis and job description, stimulated a major interest and acceptance, among
clients, for human resources interventions. This phase, remembers Del Lungo, paved the way
for Italian human resources consultants to study, experience and then propose to clients new
ideas and solutions. In his case, given the “never lost” interest for the psychoanalytical
aspects of the work organisation, he took part in some innovative experiences such as the so-
called T-Groups that were being held in Italy in those years. They had originated in the US at
the end of the 1940s with the aim of offering people an exploration of groups’ dynamics and
behaviours, and represented a big training innovation that provided the base for what is
nowadays called “team building” (from: http://www.ntl.org). The image of human resources
management and of consulting in general was finally de-coupled from the previously
pervasive productive function. As a result, the human resources activities of the following
decade (1970-80) mainly focus around various aspects of work organisation and profession
and competence analysis, job measurement & compensation .
The later developments in this field required an ulterior enlargement of human resources
practices to face the new complexity linked to clients’ demand and. Despite the fact that,
according to Feaco estimates, there has been a decline at international level in the percentage
of consulting engagements in human resources in the last five years, the percentage of
engagements in Italy remains higher than in the UK, Germany and Spain (Feaco reports,
1997, 1998 and 2000). Results from an investigation carried out by the author in the last three
years show that human resources services are still highly evaluated by Italian clients,
especially in the areas of selection and education & training.13 In these areas, the most
requested consulting interventions aim at allowing the growth of internal resources (not only
in theory but also by training on the job in simulative projects). Increasingly common are
those
13 Results have been derived from semi-structured interviews and questionnaire research. Between October 1998 and December 1999, the author interviewed twenty-four senior representatives of consulting firms operating in Italy. These included large as well as small and medium-sized consultancies, both of foreign and national origin. Subsequently, detailed questionnaires were sent to 600 members of the two major professional consultancy associations in Italy, APCO and ASSOCONSULT. 91 replies were received, representing a response rate of 15.2 per cent.
- 140 -
projects in which senior consultants act as “mentor” to young and inexperienced
entrepreneurs, especially in relation to succession processes within family firms (Crucini and
Kipping 2001). At the same time, many engagement carried out in the 1990s have included
the international benchmarking of human resources, either according to sectors or to their
qualification. In general, these kinds of engagements are in fact very much in demand by
Italian companies involved in the process of internationalisation and therefore looking for a
competitive human resources strategy when approaching foreign markets.
3.4.4 Discussion and conclusions
This chapter has attempted at showing how the development of human resources practices
took place and was influenced by the specificity of the Italian context. It has first presented
an overview of the background characterising the Italian work organisation to move on, in the
following part, to present the main changes taking place in this field from the 1950s onwards.
Some significant examples from the professional history of Silvano Del Lungo, one of the
“pioneers” that has worked in human resources since the very beginning, have been provided
in order to enhance the understanding of the conditions under which this development
occurred.
Three main assumptions were discussed and tested in the chapter. Firstly, it has been argued
that the development of human resources practices in Italy has been strongly influenced by
the specificity of the Italian context. Its initial backwardness, the attitudes of industrialists
and the “productive focus” of the main national industries all had a strong impact on the
evolution of the human resources field. Strictly connected to the first, the second assumption
was that the origin of human resources practices in Italy has to be closely related to the
evolution process of the production function and of work organisation within Italian firms.
Finally, is has been suggested how the personal initiatives of some consultants and
researchers have helped the development and growth of this field in two major ways:
compensating the scarce involvement of institutions and sometimes acting as “mediators” in
the conflicting relationship characterising the history of Italian industrial relations.
These assumptions seem confirmed from the analysis carried out in the paper. A first strong
fact that has emerged is that the specificity of the Italian industrialisation pattern and its main
characteristics had a strong influence on the development of the human resources field. More
- 141 -
in detail, a number of social, political and economic phenomena contributed to give to the
industrial (and to a certain extent managerial) organisational culture a strong and long lasting
technical-scientific connotation. In concrete terms this means that almost every operation
within Italian industries, including human resources and organisation, was for almost twenty
years (1950s and 1960s) subordinated to the productive function. The need for efficiency
soon after WWII, in order to catch up with the more advanced economies, seems to have
justified the implementation and maintenance of scientific management and Bedaux methods
despite the fact that, already in the 1930s, they had provoked a strong reaction of workers and
trade unions. Behind this “efficiency shield”, scholars claim, Italian industrialists were trying
to maintain their control of the factory and to legitimise their function. This attitude of
“closure” seems to have delayed, in the long run, the interest for the development of other
areas of organisational and managerial concerns within the Italian industry, as well as having
contributed to the conflict nature of industrial relations. Del Lungo’s experiences offer some
examples of this “closure” that characterised the first consulting interventions in the human
resources (or proto-human resources) field in the 1950s. He mentions, for example, how the
clients of the time very often did not facilitate the job of consultants and even more how, once
the consulting engagements were finished, they ignored the changes recommended by the
experts.
Outside the industrial world, institutional actors such as the State and the educational system,
especially Universities, seem to have been unable to stimulate a more diffused and effective
consciousness of the importance of these issues. The academic world has maintained for a
long time a detached and uninterested position concerning many initiatives aiming at
diffusing a modern managerial and organisational culture in Italy. This fact has also been
related to the failure of the first management schools, such as Ipsoa and Isida, in Italy in the
1950s (Gemelli 1997; Crucini 1999/2000). On the other hand, also the State seems to have
not been sufficiently involved in the promotion of new management and organisational ideas
and methods. In fact, if on one side the State was indirectly involved in some innovative
experiences, such as ENPI through the Ministry of Work, on the other hand it did not interfere
with the “conservative attitude” of the Ministry of Education or, even more significantly,
change the existing restrictive labour legislation. Del Lungo’s recollection of his first
professional experiences in selection represent a significant indicator in this respect,
describing how even those clients that showed some interests in the new practices, had to find
“illegal tricks” to overcome the existing labour laws. Last but not least, Trade Unions also
- 142 -
seem to have played a significant role in this context contributing, as for example Piore and
Sabel (1984) suggest, in maintaining shop floor relations rather problematic up to 1970s.
What can be added though, in the light of the facts presented in this paper, is that they did not
seem to be involved in promoting the diffusion of new organisational methods and practices
inside Italian firms, on the contrary they often opposed them on an “ideological base”.
All these factors constituted the specific environment in which human resources practices
evolved in Italy in the last fifty years. Initially linked to scientific management, in the
continuous search for efficiency and optimal utilisation of resources, selection processes,
training programmes and professional orientation were the first human resources services to
be developed in Italy. Only later, from the 1970s onwards, new attention will be given to
other aspects such as work organisation, groups’ dynamics, competency analysis,
differentiated training programmes, job measurement & compensation and so on. Given this
kind of initial “detachment” between the new ideas concerning human resources and their
actual application within the working environment, in other words between “theory” and
“practices”, it appears less surprising that those involved in this area called themselves
initially “social researchers” and only later “consultants”. Disregarding their names, these
people as in the case of Silvano Del Lungo, contributed with their personal initiatives and
research “to invent a new profession that did not exist in Italy” (Gallino, 1997:1316) and to
the development of the human resources field. With the scarce involvement and support of
external institutions they had to count, in most cases, on their personal network in order to get
access to information, to promote new initiatives and to promote their activities and expertise
“by words of mouth”. As emerges from Del Lungo’s narration, personal relationships have
evolved in many cases in long lasting professional partnerships. In his specific cases, friends
and colleagues met in the initial stages of his career at ENPI, such as Di Castro, or at Olivetti,
such as Butera, represent a sort of network aiming at developing human resources as a new
area of research and expertise.
On the base of these facts it seems possible to conclude that the development of the human
resources field in Italy has been a strongly “context dependent phenomenon”. Despite foreign
influences coming from the US but also from Europe (e.g. France, UK and Sweden), a fact
this last one that appears often underestimated by the existing research on the diffusion of
management ideas and methods, it seems possible to agree with Del Lungo when he claims
that “human resources practices in Italy are an Italian creation”. According to Del Lungo, in
- 143 -
fact, “the industrial culture in Italy has always exerted a resistance against foreign influences
because they cannot understand the real meaning of the hierarchical and family connotations
of the national business tradition” (from an interview on 18/12/98). In this sense, the first
generation of human resources consultants had to act and mediate between the more advanced
theories and practices in the human resource field coming from other countries and the
“constrictive” reality of the Italian environment. This included dealing with secretive clients
putting at danger the completion of their engagements or having to accept that their ideas and
solutions would not be implemented, without stopping researching and working “to match the
idea of industrial democracy with the need to maintain efficiency and productivity”. These
attempts, according to Del Lungo, symbolise the original meaning of human resources
management in Italy (from interview on 9/01/2001). On a more general level, these facts
confirm what seems to be true for the development of the consulting field in Italy as a whole,
that is to say that the systemic context exerted a strong influence in “filtrating” foreign
influences and shaping the consulting field in Italy also, and sometimes mainly, through the
role played by individuals.
- 144 -
3.5 TQM in Spain and Portugal (Celeste Amorim) 3.5.1 Introduction
This chapter examines the diffusion of management practices to small of medium automotive
suppliers located in two peripheral economies. It looks at the shape of their TQM programmes
and then explores if and why cross-firm differentiation actually emerged. Finally it points out
some remarks to the diffusion literature and standardisation argument, and managerial
implications for potential adopters of TQM.
The case of quality innovations within the Portuguese and Spanish automotive industry
provides an interesting focus for studying this topic. First, at least at conceptual level, quality
issues became highly standardised and institutionalised (e.g. Amorim, 2000, Walgenbach and
Beck, 2000), especially in the automotive industry. Building on the ISO 9000 norms,
international automobile assemblers developed their own industry-group specific quality
systems (e.g. VDA 6.1, QS 9000) which are imposed on their direct suppliers, independently
from the country where they are located, which in turn impose them on the second tier
suppliers. Secondly, the automotive industry in both economies gained increasing relevance in
the last decades, and its firms have been highly pressured to “catch-up” regarding their
management practices in general, and quality management in particular. They therefore seem
to have fully embraced the quality movement in the 1990s, when quality approaches in the
automobile industry had reached a high level of institutionalisation and standardisation.
Against this background, doubts exist about the effects from these developments upon
Spanish and Portuguese small and medium suppliers management practices, and therefore for
the standardisation argument.
3.5.2 Pressure for standardisation
As for many other management innovations, TQM can potentially include many different
routines that can be combined in different ways. However, from an institutional point view,
some combinations would become more popular leading to the emergence of a standard or
normative, presumably legitimate, form of adoption. In this perspective TQM definitions
become increasingly narrow. Subsequently, later adopters will implement the standard, and
presumably legitimate, quality programme (Westphal et al. 1997). Conformity to the standard
- 145 -
involve, for instance, the selection of quality systems, practices and tools most commonly
used, and the adoption of a standard and accepted TQM model such as the EFQM or other
nation-wide guides. Several actors stimulate firms to move in the same direction.
Multinationals and management consultants have been identified amongst the most important
actors that have the ability to influence companies` management innovation. They play an
important role for the diffusion of ideas and transmission of management knowledge.
The adoption of TQM programmes by automobile assemblers is a clear example of that effect.
International automobile assemblers impose standard quality assurance systems and practices
upon their own suppliers. Suppliers which are subsidiaries of MNEs are further pressured by
parent firm to adopt group-wide practices. Furthermore, these actors and consultants may
wield tight and intrusive actions upon automobile suppliers during the implementation, and
audit post-implementation. In this cases organisations are further pressured to conform and to
standard forms. Both international buyers and/or multinationals have a vested interest in
suppliers and/or own subsidiaries management practices and the necessary power to influence
them (see, for example, Szulansky, 1996, Kostova, 1997, Inpeken and Dinur, 1998, Grant and
Almeida, 2000 for the case of intra-MNE relations, and Linlcoln et. al., 1998, Brennan, R. and
Turnbull, 1999 for buyer-supplier relationships). In a first instance, a parent firm or a foreign
buyer can act as “catalyst” for change by serving as role model or by enforcing the
implementation of innovations. They can also play the role of “architects”, suggesting
changes and drivers for action, and might even plan the implementation. A more ambitious
service is that in which the foreign firm acts as “doctor of management” getting actively
involved with the implementation of managerial innovations. Especially in this case there is
normally a rich interaction with firm staff, crucial for an effective transfer of knowledge and
meanings (e.g.Kostova, 1997, Grant and Almeida, 2000). Finally foreign firms can also play
the role of auditors of their partners and/ or subsidiaries practices.
Similarly, external consultants participate on the diffusion of popular management ideas
(Tordoir, 1995, Schein, 1999, Faust, 1999, Bessant and Rush 1995). Consultants can play the
conventional roles of “experts, extras or facilitators” (Tisdall, 1982), satisfying the short and
long terms needs of both small and large enterprises . They develop standard models and
stimulate innovation by presenting them to potential customers in seminars, demonstration
session, publications or training, for instance. In many circumstances consultancies work as
“analysts” providing a diagnosis on a particular issue (e.g. QAS compared to standard norms,
- 146 -
HR evaluation, company SWOT analysis). Otherwise, consultants can be very similar to
“architects” (Tordoir, 1995). In this case the consultant suggests changes and drivers for
action, and plans the implementation. A more ambitious service is that in which the consultant
acts as “doctor of management” (Nees and Greiner, 1985) getting actively involved with the
implementation The consultant sits next to the client in designing and controlling the
assignment, and ensures that its suggestions are indeed going to be implemented. Especially
in this case there is normally a rich interaction between external and internal staff (Schein,
1999). Finally, firms can also use external consultants for post-implementation auditing
purposes.
Thus, exposure to such international interactions and to consultants impact on firms`
behaviour contributing for standardisation of practices. Thus, one would expect high degree
of similarity amongst suppliers TQM programmes, especially considering that they suffer
equal coercion from their buyers. Yet, it is needed to ascertain the extent to which and the
ways in which meanings are being implemented (McCabe and Wilkinson, 1998) in a
globalised industry such as automotive. Thus, the next section looks at the shape of
automotive suppliers` TQM programmes. Two groups of firms were identified: G1 following
a standard TQM approach, and G2 which does not seem to follow a standard model. It then
explores why cross-firm differentiation actually emerged. Finally it points out some remarks
to the diffusion literature and standardisation argument.
3.5.3 Methodology
For the purposes of this chapter we focused on the quality initiatives of seven automobile
suppliers located in Portugal and Spain. These were amongst the companies that in a broad
questionnaire survey (Amorim, 2000) reported to have implemented broad quality
programmes. Appendix Table 1 provides additional details accounted for when analysing the
implementation and form of quality programmes. All sites are small and medium firms,
producing automotive components. However they differ at the level of share accounted for by
this industry, their position within the automobile industry value chain and ownership.
Automobile accounts for less than 50% of C5, C1 and C4 sales. In addition three firms (C5,
C7, C4) are second tier suppliers. C2, C3 and C4 are foreign owned subsidiaries. The analysis
investigated whether these differences had major influence at the level of the implementation
process.
- 147 -
The complexity of organisational change and implementation of management innovations
implies data of qualitative type. In these cases, and considering the intrinsic nature of the
process, the case study approach is a suitable methodology (Yin, 1994, Miles and Huberman,
1994). For the purposes of this paper, the case studies data were analysed according to the
practices recommended by Miles and Huberman (1994), with a variety of graphical and
tabular formats for structuring the analysis process. Using the principle of triangulation it uses
a combination of 1 to 3 interviews per firm lasting an average of three hours, archival and
business press data to document the process of management innovation in the sample
companies.
3.5.4 Differences and similarities in TQM programmes
All the firms reported to have implemented TQM programmes in the last two decades,
contributing to a sustained modernisation of their practices and process (Appendix Table 2).
A deep analysis reveals that firms` quality programmes were indeed consistent with basic
TQM principles in strengthening internal quality assurance practices and relation with
suppliers and customers, using teamworking to solve problems and carry out specific projects,
and in investing significantly in training in quality related tools and practices. When asked for
detailed interventions all firms started by referring to the implementation of standard quality
assurance systems (QAS). QS9000 and VDA 6.1. certificates are also becoming popular.
They also adopted a significant number of industry specific statistical measures, but these to a
less extent. Thus, at a first lance, these results seem to confirm the argument that from the
original statistical ideas of Deming and Juran, TQM incorporated less technical elements with
unclear meanings, and expanded into a diffuse, increasingly unclear concept (Hackman and
Wageman, 1995, Zbaracki, 1998, Zeitz et al. 1999).
The quality literature, by and large, supports the proposition that ideal quality management is
universal and suggests that the expectations regarding quality management should be the
same regardless of the context (e.g Juran et al., 1988). However, a detailed analysis of the
major innovations introduced by focal companies reflects that cross-firm differentiation at
three levels: i.e. different combination of practices, same practices but different meanings,
decoupling, i.e. only formal adoption, thus contradicting the homogenisation hypothesis.
- 148 -
Table 3.5.1 Cross-firm differentiation regarding quality programmes
1 – Different combination of practices 2 – Same practices but different meaning 3 – Limited to formal adoption
Of all the sites, C1, C2, C3 and C4 presented the clearest evidence of having achieved higher
infusion of standard TQM philosophy. They not only use more systematically popular tools
and practices, but also follow popular, standardised, total quality management model.
Furthermore, their programmes go beyond implementation of simple compulsory QAS
practices. In addition these firms provided further evidence for the effective use of the
practices and change of routines.
C1 is a well established Spanish firm producer of fasteners, cold stamping of metal parts from
strip steel and wire, which quality management programme evolved to the adoption of EFQM
in the 1990s. Similarly, C4, an established Spanish wire and cable manufacturer acquired by a
large MNE in late 1980s, initiated a broader TQM programme, and since 1998 also adopted
EFQM. In the same line, C2 C3 foreign MNEs initiated their TQM projects as early as 1985
and early 1990s, and continued broadening it throughout the 1990s. Major steps for C2
included the ISO certification in 1994, followed by QS9000 and VDA 6.1 and the
implementation of “Chaining”. C3 moved from a non-standard quality programme, which
included the Q101, EAQF and ISO9002 certificates received as early as 1992 and 1993, to
adopt in 1998 the Balanced Scorecard as model for excellence
C5, C7 and C6 by contrast, are the firms reflecting a less standard approach. Their integration
into tighter production schedules lead to the introduction of a collection of quality
management practices in a somewhat isolated manner, usually as a simple way to reduce
uncertainty in supplier relationships. They might have the quality certificates but they do not
appear to have a broad quality framework within which the last are part off. C5, a well-
established family owned paint manufacturer and distributor, was the first Portuguese paint
company to get the ISO 9002 certificate in 1992. It moved further into the ISO 9001 (1993),
and from a continuous improvement programme to the Portuguese Excellence Prize Model
(PEX). Both projects were not successful, however. In early 1990s, C7, a established Spanish
producer of electric appliances, embarked in an ambitious process towards total quality. Yet,
the main steps have been the QS 9000 certification, after the ISO certification (ISO- 9002 in
- 149 -
1996, and the IS0 9001 in 1999). Similarly, C6 producer of auto seats established in 1988,
soon gained reputation in the market supplying diverse automotive assemblers. The
development of its quality programme has been reduced to the achievement of diverse quality
certificates.
From a neo-institutional point view, some combinations of practices should have become
more popular leading to the emergence of a standard or normative, presumably legitimate,
form of adoption. Subsequently, later adopters would implement the standard, and
presumably legitimate, quality programme (Westphal et al. 1997). Conformity to the
standards involve, for instance, the selection of quality systems, practices and tools most
commonly used, or the adoption of standard and accepted TQM forms such as the Excellence
models (e.g. EFQM or other nation-wide model). There is some degree of standardisation for
the case of compulsory practices within QAS or enforced by clients. Yet, the lack of a broad
framework by G2 became clear in the interviews. Only G1 firms reported to have a broad
approach to quality management. When asked for their background TQM literature, guides
and frameworks, only C3 implementing the Balanced Scorecard, C1 and C4 using the EFQM
model provided anything.
Similarly, in-depth analysis of the practices revealed that practices have different meanings
for different firms, and often did not follow exactly its original rules. For example, firms
tended to include under the label “team system” a variety of team activities, without
distinguishing their different aims and functioning. Lorenz and Lazaric (2000) study on the
transfer of Japanese practices to French and British-establish Japanese affiliates found clear
differences about the meaning of Kaizen. Task forces were the most reported tools, but
diversity dominates. While in five of the cases their functioning is formally defined, in other
cases (C7 and C5) they are not formalised, i.e. there is not a predefined form on the way they
work. This evidence raises doubts about the actual use of task forces. In fact, while in C7 we
were shown evidence about their actual existence, in C5 no evidence was found. In these
cases team-work does not seem to be associated with higher worker autonomy or enrichment
of workplace. By contrast, workers continued with very detailed task descriptions, strong
division between conception and execution remained and the new system seems like a mean
of maintaining hierarchical relations between managers and workers. Curiously, these have
been found on the introduction of the ISO series in the French car industry (Casper and
Hancké, 1999).
- 150 -
Intensification of relations with clients and suppliers emerged amongst the most frequent
changes within quality programmes. Concerning relations with clients for example, most sites
reported to estimate client level of satisfaction through a similar index, based on a multiplicity
of indicators, such as delivery schedule, client complains or returns, PPMs (defective parts per
million). However, firms in G1 are more active in this regard and introduced additional
practices aiming at deepening the relation with clients. C1 and C3 for example reported to
conduct client surveys. C1, C3 and C4 have direct contact with them, while for the case of the
foreign owned firms C2 the contact is mainly conducted by the parent firm. Conceptually, the
deepening of the relations with suppliers is one of the pillars of any TQM programme.
However, in most cases organisations did not do much than to give preference to certified
suppliers, and to adopt of a simple “suppliers evaluation index”, largely based on the control
of supplies at the reception. At least three firms do not even audit their own suppliers, and
only one (C1) introduced “suppliers assistance system”. C5 also attempted to go further using
“clients` seminar days” and joint teams (internal staff and clients). However, so far, the
system is neither structured nor formalised, for which most of the actions are reduced to
sporadic events without long term effects.
In addition to the latent diversity, some aspects of firms’ quality programmes do not exactly
fit with the core ideas of TQM. On the one hand scientific methods were clearly understated,
and, on the other hand, there was an increasing reliance on performance measurement and
performance-related rewards to motivate and control employees. All but one firm reported to
use statistical techniques, however a detailed analysis reveals that they use only a small
number of scientific statistic methods. The adoption and/or development of these techniques
was in all cases related to the implementation of standard quality assurance systems ultimately
imposed by clients, and its actual implementation had been confirmed through audits.
However there was not clear evidence that all sites were actually using them for management
purposes. Especially in the case of the two Portuguese firms they seem to be more used to
reduce variability by reducing the autonomy of the workforce. In addition, in G2 quality
control remained largely off-line, with a quality control service operating between section
lines, and conducted mainly by technicians. This evidence largely resemble Casper and
Hancké (199) findings for the impact of ISO 9000 on the French auto industry.
- 151 -
Concerning management of relations with employees, despite the interventions aiming at
promoting their participation and motivation on the quality programme, few actions were
taken at the level of identifying their needs and satisfaction. Only two firms conducted
internal surveys covering these issues, and even in these cases it was not a systematised
practice. By contrast there was greater concern in assuring employees participation. C1, C3
and C4 for example introduced structured, well-defined rewarding systems linked to team
performance and to suggestions leading to quality improvements.
Despite the high number of reported innovations, some were adopted only formally, while
firm processes and internal routines remained practically unchanged. For example, in a first
instance C5 and C7 highlighted the major turnaround that had occurred in “company culture”.
However, later in the interview they also expressed considerable frustration and recognised
that in fact “….the organisational practices changed very little. The quality system brought
mainly formalisation and systematisation of the things we were already doing”. C6 quality
manager did the same comment. In the other cases, such as G1 firms, C2, and C4, managers
started by arguing how things had changed little, but brought to light numerous changes that
had occurred with the broadening and deepening of firm quality programme. This dichotomy
between adoption and rethorical adoption is also implicit in the study conducted by Rosett and
Rosett (1999) in the US. As they have shown, six out of fifteen firms have adopted one form
of TQM, but without incurring the costs associated with major organisational change.
From the above it is clear that when compared to G2, G1 firms achieved higher level of
infusion of TQM philosophy. Following Miles and Huberman (1994) the study identified
factors contributing most for the differences. They are described in the following section.
3.5.5 Explanatory variables
3.5.5.1 Involvement of external actors International buyers and parent firms played the role of (1) catalyst for change by imposing -
or strongly suggesting- standard quality assurance systems and practices. Firms were further
pressured to conform through inspection at the level of operational routines. Indeed, within
the automobile industry, and concerning quality programmes in particular, buyers` audits
became a common place . Because the norms and buyers` requirements apply equally to all
automobile suppliers, the external auditing process is likely to enforce standardisation of
practices across firms, even in these two peripheral economies. International buyers had a
- 152 -
further impact by getting actively involved with the (2) implementation of quality
innovations. Yet, at this level, firms counted with the support from two other type of agents,
namely consultants, and foreign parent firms for the case of foreign MNEs.
The typology proposed recently by Kipping and Armbrüster (1998) (M&A in the Table)
seems to be especially relevant to understand the process. If applied to the case of quality
innovations in the automotive industry (Table 2), this typology shows the role of the referred
actors in complementing the skills of the “receivers” (1) by familiarising them with general
quality concepts and ideas; (2) by providing them with additional quality-related know-how
applied to the automotive industry; and (3) with skills of the procedural type to carry-out the
implementation. While the first two types of knowledge are more explicit and endemic,
capable of codification and therefore of communication, procedural knowledge is mainly of
experimental and existential nature. Its transfer is slow and costly, its acquisition requiring
careful interpersonal contact and extensive learning by doing.
Table 3.5.2 Management knowledge: applied to quality in automotive K&A (1998)
Example for the case of TQM in automobile
General Total quality management concepts applicable to a wide and diverse range of organisations, …
Specific Knowledge
Industry specific total quality management concepts, e.g. industry standards, best practice guidelines, …
Procedural How to change the organisation, how to integrate high context embedded practices such as quality circles into a new organisation (e.g. quality circles)
Consultants contact with many firms, across industries and contexts and were at advantage as
source of general management knowledge, but regarding specialist knowledge, buyers and
foreign parents were good alternative sources of know-how. They provided the “receiver”
with “blue prints” “best practice” or “benchmarks” based on the collective knowledge of the
automobile industry and its specific quality programmes. These have been provided mainly
through demonstrations, seminars and detailed manuals, quality assurance and improvement
studies. In addition, specific knowledge was also provided by international buyers and parent
forms through training, but this has been rather limited.
Knowledge of the codified type (e.g. explicit or endemic) is easy to transmit, yet further skills
are needed to undertake a total quality project. Firms need knowledge of procedural type.
Companies themselves obviously also have procedural knowledge, but this is “routine” type
- 153 -
knowledge, i.e. it is carried out repeatedly and only evolves very slowly (Nelson and Winter,
1982). Consultancies, by contrast, develop processes which they apply to change the existing
routines in companies. But if companies want to appropriate this knowledge, they need to
work in close relationship with the external experts during the implementation process. High-
intensity, inter-personal contact were especially important for transfer of tacit type of
knowledge (procedural, and experimental) (Keiser, 1998). Furthermore intense personnel
contact reduced the potential for different interpretations of codified information expressed in
manuals (Nees and Greiner, 1985, Schein, 1999). In addition to transfer of knowledge, there
was transfer of meaning, thus promoting standardisation across adopters.
International buyers and parent firms also provided such type of consultancy support. Large
automotive customers developed “suppliers support offices” which worked temporarily with
the suppliers exchanging with them detailed information, and even personnel. Yet, the
acquisition of tacit knowledge from international buyers and parent firms has been rather
limited, which explains the frequent use of external consultants on the implementation of
quality innovations. Firms received support either from their own multinational automotive
clients, parent firms or/and from external consultants. These agents provided firms with
generic and specialised information, thus driving them to implement popular practices and
tools. In addition they were used to overcome firms` lack of operational capacity and to push
the new practices against organisational inertia. The direct involvement of external agents also
speeded-up the implementation. They brought to bear new general concepts very fast. In
applying these ideas they have considerable authority, derived from their role as external
observers and/or from their power as an important partner. The intensity and quality of
relationships was one first filter contributing for different quality approaches.
These findings are in line with Sturdy (1997) and Fincham (1999) who have also called
attention for the quality of the consultant-client relationship. In our case studies, companies
with richer interactions show higher levels of conformity with standards.
3.6.5.2 Interaction with externals Group 1 firms show a rich interaction with external actors. Consultants are considered by each
of the firms as a necessary condition for maintaining their competitiveness, as a means for
implementing the firm overall strategic direction, and the use of consultancy is a regular
activity. Often it is directed at solving a particular technical problem or at complex projects
- 154 -
that represent the basis for future developments and affect crucial areas of expertise, which lie
outside its normal range of activities and beyond its existing resource base. Consultants are
used as providers of short-term extra resources, to provide external support and momentum
for courses of action already favoured within the firm, or to provide a mechanism for
implementing unpopular measures. Examples here include the use of consultancy to integrate
quality practices, to introduce new broader concepts (e.g. Taguchi, quality function
development, TPM).
Another underlying assumption in this market is that users have considerable experience of
consultants and can manage the process well. Normally, internal staff works together with
external consultants in an equal basis. Noteworthy too was the suggestion that the relationship
between client and consultant brought benefits to both sides. It also corresponds to one of
interdependency between consultants and the other external actors, i.e. client and/or parent
firm. They are not dependent on consultants as sources of external skills, but play an
important role by bridging the gap between internal capacity and the need to implement
group-wide policies and clients requirements.
C1 is probably the one showing clearer long-term complementary interaction between both
consultants and foreign clients. Since the 1950s that its automotive clients provided stimulus
and support for the introduction of quality innovations. Ford seems to have had a particular
role in this regard. Even in the 1990s it provided not only the manual, but also training and
support to implement TQM. Additionally C1 employed consultants for its implementation.
Meanwhile the company`s total quality programme has also graduated from a non-systematic
TQM model to the present EFQM. Continuous and informal contacts, joint quality teams, and
visits to foreign clients continued being a good source for further advances. Seat and Nissan
for instance, supported the implementation of “task forces” (1996/7).
Consultants also had a complementary role for the majority of the foreign owned subsidiaries.
Their practices have been highly determined not only by consultants and foreign clients, but
also, and, more importantly by group-wide policies and international intra-firm diffusion of
knowledge.
C4 reflects consultants role on the implementation of practices coercively imposed by clients
and parent firm. In late 1980s the MNE C4 acquired a small participation of this long
- 155 -
established Spanish wire and cable manufacturer. They immediately implemented a few
innovations, amongst which the ISO 9001 model (1991), with consultants. Yet, only in 1993,
when MNE C4 acquired the remaining company equity, did the Spanish unit adopted a more
aggressive and ambitious management stance. To a certain degree it reflects foreign parent
strategy, and its increasing interventionist style by strongly suggesting the introduction of new
management practices and tools (e.g. MBO in 1993 or the EFQM model in 1998). The
advances in C4 quality practices also reflect to a large extent the influence from its
automotive customers. However, both intra-firm and inter-firm exchange has been
predominantly documentary based. Thus, firm started using consultants more strategically
and for more ambitious projects in the quality field. The first step of its TQM programme was
probably the implementation in 1993/4 of continuous improvement groupings with the
support from a University Professor. Meanwhile C4 continued using SMC domestic
consultancies mainly for training and auditing. By last, they started with the EFQM project
with the support from English consultants in 1998. In this case the practice and the
consultants were “imposed” and selected by the parent firm, which reflects that C4 is
increasingly using new mechanisms to transfer knowledge within the group.
The remaining two foreign owned subsidiaries by contrast provide probably the best examples
on the complementary between consultants and intra-firm international diffusion of ideas.
Despite separated for almost a decade, both C2, tyre manufacturer, and C3 , started operations
in Portugal by acquiring two decadent long established Portuguese firms, leading to a
profound restructuring process. This started with the transfer of a massive package including
new technology and production processes, organisational structure and management tools. In
both cases the company processes and organisation, the design of the quality programme in
particular, were modelled on group-wide best practices.
Initially, intra-firm exchange of personnel became the principal mechanisms for the intra-firm
transfer of knowledge. Codified knowledge was transferred mainly in the form of
documentation, intranet and formal training. Knowledge of tacit type implied exchanges of
managers and technical staff. In C2 a total of 14 expatriates, including the top and functional
managers (production, finance and quality), staff and engineers, were permanently transferred
to the Portuguese plant. In C3 expatriates also occupied crucial positions of control and
definition of company operations, finance, industrial, production and quality management.
- 156 -
This “…helped to reduce misunderstanding due to lack of knowledge and language barriers”
(C3, 04/09/1999).
Consultants also played its role even in the early days of plant operations. They played a
bridging and determinant role for the implementation of TQM in C2 group. They provided
training and support on the implementation of JIT (English consultants) and SPC (an
American professor). The strategy followed by both firms and the type of mechanisms used
for transfer of practices seem to have been assertive. They needed small adaptations in order
to satisfy the QAS that meanwhile had been increasingly enforced by its clients, both directly
or indirectly through the parent firm. C3 got Q101, EAQF and ISO9002 as early as 1992 and
1993 and C2 got the ISO 9001 in 1994: “..we did not have to introduce any major innovations
in order to get the ISO certificate in 1994 because our quality system was already very much
advanced…” (C2, 01/07/1999).
Firms’ quality programmes evolved continuously reflecting market demand pressures. Basic
knowledge for the implementation of such practices has been transferred through “quality
manuals and requirements, or while negotiating quality development plans, and during
clients` audits. In a few occasions clients also provided some training. However, know-how
sharing has been mainly informal and there has been few potential to the transfer of more tacit
type knowledge. In addition, in both cases the contact with the clients has been conducted by
the parent firm, for which the subsidiary does not have much direct contact with them. Thus,
their quality programmes evolved relying to a large extent on the know-how transferred from
the group. Company wide total quality programmes are based on the diffusion of best
practices, by annual audits from an internal international auditing team, by providing training,
or simply by imposing new practices. These have been further stimulated over the 1990s. In
this regard, both groups decided to implement QS9000 and VDA 6.1 and imposed the
certification on their subsidiaries. The parent company provided all the necessary information
and support, including training (e.g. for C3).
In addition, both firms stimulate the diffusion of such know-how through temporary
exchanges of employees and managers, and international training programmes for managers
combining formal and on-the-job training. Our interviewee at C3 for example attended the
international training for managers, which included formal training, and six months on-the-job
training at one Plant in Germany. He returned to the Portuguese plant as quality manager and
- 157 -
will probably become production manager. C2 also has this type of training. At the time of the
interview, C2 had six managers abroad. In C3, diffusion of best practices also occurs by a
subtle control through the creation of pressures on managers at plant level to behave in certain
ways: these included external and internal benchmarking comparative studies. The first
consists on evaluation studies conducted by external consultancies. For instance in 1997 the
Group hired an international consultancy to compare group subsidiaries against best practices
in the industry. Each plant received its own evaluation referring to its weak and strong points
compared to the average in the industry. This study has been used as departing point for
further improvement. The second type of benchmarking has been further stimulated in 1998
with the adoption of a “Balanced Scorecard” system against which all plants are classified.
Both companies counted with consultants for developing its quality system. They have been
used for pontual initiatives, including in situ training (e.g. for auditors), as well as for the
implementation of broader projects and new practices. The most recent innovation at C2 has
been the diffusion of “Chaining” as a tool for continuous improvement. C2 plants have been
receiving training and support for the implementation from an individual consultant from
Germany. The Portuguese C3 plant also worked with foreign consultants for external
benchmarking studies and on the implementation of TPM. For the last the Group hired the
consultancy working with the guru Hartman. Their role included diagnosis, training, planning
and follow-up the implementation. The subsidiary itself has sufficient autonomy to hire
consultants for other quality initiatives, and it has in fact used them, for instance for the
design, implementation and analysis of a client survey in 1999.
By contrast to G1, the quality programme of firms in G2 has evolved slowly, consisting
mainly on the implementation and upgrading of standard quality assurance systems (e.g. ISO,
QS9000, VDA 6.1), being the quality certificates the final aim. For these firms clients proved
to be an important catalyst and an alternative source of knowledge for introducing quality
innovations. The flow of know-how occurred mainly formally through clients` audits,
“suppliers quality manuals”, and while negotiating yearly quality development plans. Visits to
clients and training did occur, but they are rare. Most of the exchange of know-how occurs
informally, mainly within the relations between firms` quality and production managers.
Despite the simplicity of their programmes, consultants were here obligatory passage points:
need for extra-capacity and expertise in the QAS and application for public funding for its
implementation.
- 158 -
Consultants worked here as analysts, i.e. identify costs of inefficiencies in the existing quality
system compared to a standard, and architects, i.e. suggested how to overcome the
weaknesses. They further worked as “doctors”, formulating and implementing the necessary
innovations, as well as the management of the project itself. In addition, they contributed with
basic training and introduced new routines in the area of processes and quality management
practices. These consisted mainly on the systematisation of firm internal procedures, and on
the compulsory practices accordingly to each QAS. A common feature of these firms is that
using consultants became even more attractive considering the quality programmes public
funding policies, which include funding for consultancy support.
C5 largest client, a JV between a Portuguese and a Japanese automotive assembler, was the
catalyst for the implementation of ISO as early as 1991. They provided mainly explicit type of
know-how and limited support with designing the system, planning and implementing. After
this first push, clients became mainly catalysts for change, while providing limited knowledge
for the implementation. This in turn could have been acquired from consultants, however their
involvement was rather limited. C5 for example worked with consultants for the subsequent
ISO 9001 project, and after on PEX and CIG in 1995 and 1997/8 respectively. They were
employed mainly for diagnostics and training however. For C6 and C7 knowledge sharing
with the automotive buyers has been considerable important for posteriori development of
firm quality practices, while being very sceptical about consultants. C7 for example, hired a
consulting firm for the ISO 9002 project, but it was not before 1996 that they got the
certificate. Since then C7 received pontual support from an individual consultant for ISO
9001 and QS9000 certificates. Yet, he is much less involved with implementation. C6 also
hired an individual consultant, but the process for certification was slow and confrontational,
and the quality manager and consultant never worked as a team. Recently, C6 decided to work
on the QS9000 without consultants.
Auditing scope
There is evidence that external quality audits in particular pushed firms to actual adoption of
standard quality practices. All focal organisations reported that changes were introduced
either ex ante or a posterior the audits. However the process did not totally preclude
differentiation. First, due to high subjectivity at normative level the audit report depends to a
great extent on the auditing team itself. Most buyers and parent firms recognise accreditation
- 159 -
from independent auditing, and if following industry standards the evaluation continued
dependent on auditors approach: “…TRW audited us just a few months after Keiper, and they
did not consider at all the results of the later (…) Keiper classified us with a C and a couple of
months after Lear classified us with an A.” (C6, 6/09/1999). “However clients differ from
each other, and even auditors from the same client have different behaviour.” (C3,
10/08/1999).
While scope for differentiation seems to have increased with the proliferation of accredited
institutions, there has been increasing intra-industry standardisation supported by normative
detail, by auditors experience and their industry specialisation: “In the beginning the IPQ
auditors were a bit lost. Tended to go into details about the ISO norm…and we implemented
things we were strictly obliged to. Meanwhile auditors gained more flexibility and they are
able to interpret the norm from our industry point of view” (C3, 4/09/1999).
Secondly, the dubious relation between audited firm and auditors reduces pressure for
standardisation. These effects are easily identified at the three levels of auditing, and both
groups reported similar experiences. Repeated contact with the same auditors might have also
hampered standardisation (e.g. C6 for ISO and C7 for QS 9000). Furthermore, in a few cases
the same external auditors were -or had been- used as consultants/ optional external auditors
for other quality related projects. In both countries the legal constraints have not been so far
efficient to preclude these events. This “dubious” relation between firms and auditors created
again possibility for decoupling between formal adoption and operations.
3.5.5.3 Knowledge / practice specificity Firm specificity seemed highly related to the embeddedeness of the practices involved.
Certain quality tools such as quality circles for example are highly embedded (Chai and
Gregory, 2000) and therefore difficult to transfer. In our cases, we found that even when
externals participated on the implementation process, firm product and production system
barrier cross-firm standardisation. During the ISO project (1995) an individual consultant
attempted to implement at C6 “SPC practices, such as 8Ds and FMAs, widely used in the
automobile industry”. However, the interview with the C6/S quality manager revealed that
subsequently they had abandoned that system because “…in this industry the SPC per
attributes is not applicable”. He continued arguing that “… is not a problem of our firm, I
- 160 -
Know several other textile firms which attempted to introduce it without success.” (C6,
6/09/1999). The Portuguese producer of auto seats C6 for example has also shown particular
needs. Chrysler requirements, for example, were negotiated because of product specificity:
“..their system demands control over the noise of the component when being used! How can
one ensure that a seat made with sponges and leather will not make noise when someone seats
on it? I discussed with them and fortunately they understood”.
Considering that the Portuguese independent component industry is still relatively
unsophisticated with production focusing on the manufacturing of low technical products, C6
experience might be quite representative of the Portuguese situation. By contrast, considering
their specialisation, Spanish auto component producers might have less problems in this
regard. It must be highlighted that the impact of product specificity on the transfer of practices
has been found in many contexts, from supplier-buyer relations (e.g. Brennan and Turnbull,
1998) to transfers within MNCs.
3.5.5.4 Firm specificity Lack of absorptive capacity
Companies used external consultants and received external support; however, pre-existing
operational relevant knowledge, both at the managerial and employee level, facilitated the
compliance with standards. While some organisations had capacity to absorb, interpret,
circulate and utilise the knowledge, others revealed great difficulties. All companies reported
to have invested strongly in training, both at management and employee level, but often they
lacked operational know-how to implement it. G1 firms in particular developed such
capabilities over time, and their absorptive capacity was stimulated directly by sending
personnel for advanced training, or by recruiting new managers, for instance.
C4 for example, embarked in a continuous improvement programme in mid 1990s. They went
through several stages, and their efforts to carry on looked like experiments. They started by
implementing a collection of tools and practices rather than a coherent broad quality
programme, and a few actions failed to produce long-term results. Internal staff continued
receiving intensive training, in both organisational and technical aspects of quality
programmes. Finally, by 1997/8, C4 adopted the EFQM model, following worldwide group
strategy, and starting working strategically with external consultants. Accumulated
- 161 -
capabilities also made the difference for C1. The quality manager revealed they have
“…achieved a third stage characterised by active acceptance and enthusiasm (.…) one of the
secrets was for sure the flexibility and experience of the people leading the project” (C1,
14/06/1999).
By contrast, the lack of operational experience blocked C5 “excellence programme”, initially
introduced by external consultants. Their continuous improvement programme, suggested and
developed by a well-known international consultancy, had a similar end: “…the consultants
should have supported us for longer because we had not acquired the necessary operational
skills to carry on” (C5, 14/04/1999). They invested strongly in training in quality tools and
practices for their employees, but these often ignored them. Unfortunately, other firms (e.g.
C7) shared the same experience. Such disappointments result from problems at the training
level and management approach. They were particularly strong when training had been
mainly of theoretical type and given by external consultants, for which employees continued
lacking operational skills to take-on the new practices.
Prior knowledge has been found a determinant factor in other studies as well. Benson at al.
(1991) study on 20 companies the US for example, found it to be a determinant for explaining
and predicting quality management practices. In addition, it has been highlighted in many
studies on the transfer of know-how within firms (e.g. Szulansky, 1996). Higher experience
was associated with easier acquisition and use of new knowledge, especially for smaller
“receivers”.
Lack of resources and management motivation
Firms suffered from some “natural” inertia (Nelson and Winter, 1982) not only because
existing routines were difficult to change but also because organisation members found
difficult to integrate them with existing practices. Group 1 firms managed to overcome
organisational inertia reaching deep organisational change. The incapacity to overcome
organisational inertia seemed much related with two main factors, scarcity of resources and
managers’ lack of motivation.
Organisations are often caught in situations of rapid change, and having to deal with multiple,
often conflicting, situations (e.g. company growth, change in internal structure). Organisations
with a large pool of resources found easier to actually implement new practices. G1 firms
- 162 -
show fewer problems at this level, whereas G2 firms were more strongly affected. Even if
they had internal know-how, G2 firms often lacked the resources to fully implement certain
new practices. The quality programmes depended less on financial resources and more on the
human capital. C7 provide the best example on how rapid company growth and consequent
scarcity of human resources delayed the changing process. As we referred earlier it took C7
more than 6 years to standardise its system accordingly to ISO 90001. Apart from the firm
cultural barriers, “… the company was growing at a fast pace (in five years with doubled the
production and sales) and as a result there was no time to structure internal processes” (C7,
16/06/1999). Despite the support received from clients and consultants, C6 quality manager
also argued that he was “….too involved in other issues and let the time to pass bye”. As a
result, practices demanding higher commitment and enforcement were dropped.
Additionally, while in some firms top managers were actively involved with the
implementation of new quality practices (e.g. G1 firms), whereas in some others (G2 mainly)
the lack of management` commitment with the implementation was more than clear. Often, in
interviewees` statements was implicit that new practices were seen as a new ways for others
to work. Top managers would define teams, set-up their aims and reward systems but they
would not participate on the implementation. C5 C.E.O., for example., clearly revealed
detachment towards quality programmes: “…ISO is a fashion… the certification itself is
bullshit. It consists in writing up what was already being done ...” (C5, 23/03/1999)
This background helps to explain why C5 attempts to embark in a broad quality programme
did not go far. C6 by contrast, seems to have learned with its own mistakes. In 1994/5 the lack
of management commitment seriously affected the progression of its quality programme
(process for ISO certification). As mentioned by the consultant working for C6 (and
confirmed with C6 internal managers): “I gave training but things would not be applied
mainly because there was lack of involvement and commitment from the top-managers”.
Since then things changed considerably, and the quality programme gained a new boost.
Administrators took the lead of the ISO process and nowadays they are actively involved in
different quality teams. However, this firm has decided to develop its programme relying
mainly on internal resources, for which it has been a slow, step-by-step process. Rosett and
Rosett (1999), Benson at al. (1991) also found that that leadership, management commitment
and motivation for change was a critical factor on the adoption of TQM. Sull et al. (1997)
- 163 -
have also shown that managerial commitment played an important role in US tire makers
response to radical technological change, thus supporting the view that commitments should
be considered with competencies in examining how firms respond to technological change.
This interpretation of the key role of the leaders is in line with findings of Penrose (1959) and
the work of Schumpeter on the theory of the firm (1990).
3.5.5.5 Country specificity Under TQM employees should have numerous opportunities to demonstrate initiative,
initiative and leadership. In this regard, a few firms implemented a well-defined rewarding
system linked to employees contribution to continuous improvement. Yet, some country
specificity may exist. Our findings suggest that in Portugal and Spain TQM has not been used
as a method of identifying employees eligible for promotion, which contrasts with the
findings of Rosett and Rosett (1999) for the US case. In this regard, Rosett and Rosett (1999)
found that subjective rewards (e.g. public recognition) and promotion were the main type of
rewards. This particularity might reflect Iberian countries management specificity in terms of
promotion and rewarding systems. These are often said to be based on subjective evaluations,
and preferential relationships. Thus, even for firms using standard forms of TQM, there seems
to be some country adaptation concerning relation with employees. In this regard, Lorenz and
Lazaric (2000) found that Japanese multinationals operating in Britain and France have
experienced only partial success on the transfer of Japanese employment practices. This was
mainly due to features of job grading, career and training systems which wee specific to each
national setting. This effect in the Iberia has yet to be further explored with a higher number
of cases.
A detailed cross country comparison reveals the implementation of quality innovations was
also shaped by different societal models of industrial specialisation, reflected in labour
markets and development of business support industries.
In the 1980s and 1990s, the Spanish automobile suppliers benefited to a greater extent from
the existence of a pool of skilled workforce and specialised business services (e.g.
technological centres and professional associations). Portuguese companies by contrast could
hardly find local sources of specialised know-how and often they has to search it abroad. :
“…in early 1990s there were no business supporting industries because automobile was a new
- 164 -
manufacturing industry in Portugal”...and despite very positive developments “the automobile
is still an emergent industry”. As others, this firm had to “…use Spanish consultants when
implementing QS9000 (…) VDA because there were no alternatives in Portugal”. Even for
auditing of industry-specific systems Portuguese located firm has not alternative than to use
foreign institutions. In this regard, it is safe to argue that the automobile industry developed
earlier and more in Spain than in Portugal, and this partly explains, the belated development
of automotive-specific business services in Portugal. This result is in line with Kostova
(1997), which also found that the Portuguese Institutional profile was less supportive for the
implementation of TQM practices than the Spanish one.
Attention should be given to the strategic actions firms put in place to counteract the
environment lock-in. Some organisations seemed far more able to do that. In this context, the
support received either from multinational clients and/or from parent firm became crucial
sources of industry-specific know-how. Multinational subsidiaries (C2, C3, C4 all G1)
counted with the know-how and support from parent companies, being much less dependent
(compared for instance to G2 firm C6) on local supply of know-how. They could exploit
group best practices and resources, and their capabilities partly reflect their enjoyment of the
skills and institutional strengths of their parent firms.
Bringing all forces together, it is easy to understand why C1, C3, C4 and C2 reached higher
level of standardisation and infusion of TQM philosophy. External actors and firm specificity
complemented each other for the implementation of popular tools and practices. The four
firms ranked highly the role of external actors and showed less concern with the barriers in
the process. They have shown higher absorptive capacity, and greater ability to overcome
organisational inertia. In addition, C3 and C2 overcome the environmental lock-in by having
access to its foreign parent know-how. G2 firms highlighted much more barriers for the
implementation of popular tools and practices. C5 in particular has not been able to put in
practice a broad “quality programme” despite frequent participation of external experts. The
barriers for implementation were clear in this case. Lack of absorptive capacity, lack of
managers commitment were the main filters. C7 and C6 gave more relevance to internal
sources of know-how and show poor interactions with externals.
3.5.6 Conclusion
- 165 -
The findings to a certain degree contradict the predictions of the new-institutional theory. The
case studies show that conceptually organisations have all adopted quality programmes.
However, by focusing on what is actually implemented, the paper highlights that the adoption
of popular management ideas, and that the so-called standardisation, is neither automatic
neither natural. The study revealed a number of factors or ‘filters’ which influenced the
outcome in each of the cases. They are summarized in the following table.
Table 3.5.3 Filters for the implementation of TQM Type of factors Force Direction of the pressure External actors
Consultants Customers Parent firm
Standardisation
Interaction with externals Quality of relations Audit scope
Low quality relationship Subjectivity and dubious relations
Customisation
Knowledge specificity Technology embedded Customisation Firm specificity Lack of absorptive capacity
Lack of resources Management positioning
Customisation
Country specificity Organisational context less supportive: Industry development, labour market, business services
Customisation
Thus, despite the evidence that total quality programmes are being adopted by numerous
organisations, the problem is that what many organisations are actually implementing is a pale
or a highly distorted version of the TQM philosophy. In response to institutional arguments
that institutional processes generate an increasingly narrow definition of TQM, evidence here
from quality programmes in use suggests just the opposite: definitions of TQM grow
increasingly broad. The key distinction here lies in TQM as adopted and TQM as used and
understood. A number of interventions, related to the original TQM philosophy or not, are
increasingly being herded under the TQM banner. Every intervention has been reported as
part of TQM. The most frequently chosen add-on interventions (e.g. performance-contingency
rewards, work redesign and empowerment) reflect that the boundaries of the management
programme became blurred as more and more initiatives are launched in its name. TQM has
been criticised because this increased broadness. However, it seems to rely precisely on being
flexible and not too radical, and therefore easily installed in everyday life of the organisation.
- 166 -
The results confirm that international buyers, foreign parent firms and consultants drove firms
to implement popular quality tools, practices and models, but firms` experiences differ. From
a micro perspective, we have seen at adoption of TQM it is a complex, multi-level process,
and that management practices and tools were not easily transferred between dissimilar
environments. This is a question of practical relevance and strategic importance within the
context of organisational change. The implementation of those ideas was often filtered, and in
some cases espoused changes appeared to “have failed”, i.e. did not lead to actual
modification of existing routines. This might be because in fact they never got implemented.
Most changes may be more rhetoric than real, as in a programme that exhorts people to alter
their behaviour but the ultimate interest is the achievement of a quality certificate. Despite
mimetic, normative and coercive forces for the adoption of quality innovations, what “quality
programmes” came to mean to each organisation depended mainly on the interplay between
(i) interaction with external actors (ii) product, firm and country specificity. International
exposure and use of consultants by itself did not necessarily lead to standardisation. By
contrast to poor interactions, rich interactions within which knowledge and meanings are
transferred fostered indeed conformity to standard TQM approaches. These were
complemented by top management commitment and absorptive capacity in particular.
It was also highlighted that variation across firms and across countries must be treated
explicitly in the context of the evolution of industries. The perspective developed above
accepts this recognition, with the twist that some of this variation is attributable to the effects
of firm specificity. We referred to foreign branches of MNEs, for example, which benefited
from group best practices and resources, largely counteracting the environmental lock-in.
Finally, the chapter has also important policy implications. Nations are characterised by
particular modes of institutional governance, and by the national focus of policies, laws and
regulations. Together, they contribute to shape the organisational and technological context
within which each economic activity takes place. In a sense, they set the opportunities and
constraints facing each individual firm process of innovation. In this context governments
direct firms innovative paths by using policies favouring particular charters for instance.
However, caution should be in place to ensure that such “innovations” go beyond formal
adoption, and lead to effective change of routines and mentalities. Our evidence shows that
innovation policies may suffer from important shortcomings that need to be addressed. First
the financial incentives must be complemented with a set of conditions facilitating the access
- 167 -
to sources of know-how and firms capacity to use and implement such knowledge. Within the
latter we include, for example, the availability of complementary skills, information and
intermediate inputs and capital goods. The lack of local specialised sources of know-how was
more evident in Portugal. This event propelled firms either to develop their quality
programmes mainly with internal resources, to use less industry-specialised sources or foreign
located institutions. This is particularly important considering that domestic firms (especially
those with less resources) are the ones` more affected by the contextual variables. Secondly,
caution should be in place at the level of auditing. There is the need to ensure that firms are
actually changing routines and not adopting the practices merely formally, for the purposes of
accessing to subsidies, or/and formal certificates. Ignoring factors that affect firms behaviour
will lead to inaccurate assessment of the effects of policies.
- 168 -
3.6 TQM in Public Management in Britain and France (Denis Saint-Martin) 3.6.1 Introduction
This chapter seeks to offer an alternative interpretation to account for the rise of the New
Public Management (NPM) and of the new “entrepreneurial” culture in government by
studying and comparing the adoption of Total Quality Management reforms in the British and
French public sectors in the mid-1980s. The NPM is shorthand for the group of management
ideas and techniques imported from the business sector that dominated the bureaucratic
reform policy agenda of OECD countries since the 1980s (Hood, 1991). The NPM is closely
linked to Total Quality Management ideas (Ingraham, 1995). Like the “excellence” stream
made influential by two McKinsey consultants in the 1980s (Peters and Waterman, 1982), the
NPM focuses on decentralization, empowerment, de-layering, and on getting close to citizens,
re-defined as “clients” or “consumers” of public services.
Existing approaches seeking to explain the development of the NPM or the new
“entrepreneurialism” in government are very much “business-centric” (Saint-Martin, 2000).
Both the entry of NPM ideas in government and of the private sector consultants who acted -
to use Max Weber’s term - as the “social bearers” of these ideas, are generally seen as an
extension of developments that took place independently of the state and that have their
origins in the more innovative and dynamic private sector. Since NPM ideas come from
commerce and industry, and since these ideas have entered the state on the “shoulders” of
management consulting interests who also come from the business sector, the process by
which government is supposedly becoming more “entrepreneurial” is primarily seen as a
private sector-driven phenomenon. In this interpretation, policy-makers are more or less seen
as passive actors who are simply following – often with a considerable time lag - external
developments in the business sector upon which they have no real or direct influence.
Of course, it is certainly not false to argue that the NPM reflects the perceived superiority of
business management methods and values (Kirkpatrick and Lucio, 1995). It is true that the
NPM “emanates from sources external to public mangement per se, namely the literature on
private sector or business administration” (Aucoin, 1990: 117). And the “latest wave of
business managerialism”, as two senior partners in the London office of what is now
PriceCoopers themselves recognize, has indeed been “mainly brought into the public sector
- 169 -
by management consultants” (Foster and Plowden, 1996: 1). But this almost exclusive focus
on the business sector as the sole source of administrative innovation and change has eclipsed
the more active role played by the state in the promotion and diffusion of new management
ideas and practices. It is true that new management ideas such as those related to TQM were
imported into government once consultants had popularized them in the business sector and
once they had penetrated private industries (Pollitt and Bouckaert, 1995). Thus, is one thing to
say that, in reforming its administration, the state imported management ideas from the
private sector. Yet this says nothing about how these ideas got into the private sector in the
first place.
During the 1980s businesses increasingly incorporated TQM ideas into their management
practices but, as we shall see, they did so partly because of state policies. During the 1980s,
under the right-wing governments of Prime Minister Thatcher and Chirac, the British and
French central state played a key role in influencing both the diffusion and penetration of
TQM ideas in private industry, especially in the sector of Small and Medium Enterprises
(SMEs). The central argument developed here is that in reforming the public sector, policy-
makers in government did not simply follow the private sector: many of the new management
ideas and practices that businesses adopted during the 1980s were actively sponsored by the
state. In the context of the formation of the European Union, both Britain and France launched
in the mid-1980s industrial policies and nation-wide “quality initiatives” that sought to bolster
industrial performance and create a new “enterprise culture” by providing to SMEs money to
buy management consulting services as a way to modernize their administrative practices and
increase their efficiency and competitiveness. These policies not only contributed to the
growth of management consultancy. Through their implementation, consultants also built
channels of communication and networks of expertise with the state, which subsequently
created opportunities for consultants to participate in the process of public sector reform and
apply to government the same “entrepreneurial” approach that the state was at the same time
actively sponsoring in private industry.
Building on the theoretical insights developed by historical-institutionalists (Steinmo, Thelen
and Longstreth, 1992), the approach I take in this paper gives a more state-centred account of
the rise of the new “entrepreneurial culture” in the 1980s. To do so, the paper stresses the
“permeability” of policy sectors (Weir, 1992) as it seeks to understand the direct antecedents
of TQM innovations in the field of public sector reform by studying initiatives formally
- 170 -
classified in the industrial policy arena. This permeability is partly based on the fact that
policy-makers in both the industrial and bureaucratic reform policy sectors share a relatively
similar concern with management and organizational issues. And for civil service reformers in
Britain and France, this concern became especially important following the election of New
Right leaders in the 1980s, who believed that private business management was superior to its
public sector counterpart and who sought to improve government by borrowing its
management techniques. As the political support for making government more ‘business-like’
became stronger - and as this ideology downplays the differences between public and privator
sector management - the boundaries, both intellectual and institutional, separating the
industrial policy arena from the bureaucratic reform policy sector became less clear and more
porous. And as we shall see, this opened new possibilities for policy learning processes to
take place across the two sectors and for management consultants to help transfer TQM ideas
from the industrial policy area to the field of public sector reform.
The chapter is divided into three parts. The first looks at the Quality Initiative launched by
Britain and France in the 1980s, stressing how industrial policy-makers in the two countries
mobilized management consultants as a way to enhance the efficiency of SMEs and improve
their competitive location in the European Union market. The paper then moves on to the
analysis of public sector reform, showing how management consultants played a key role
developing and implementing TQM policies in the British and French governments. Finally,
the paper concludes on a more theoretical note, discussing the relevance of studying
relationships between policy areas that are often viewed as separate. In the case of TQM,
industrial policy - even if formally belonging to another sector of governmental activity -
nonetheless shaped both the type of approaches used in, and the politics of, public sector
reform.
3.6.2 Promoting consultancy: the State and the quality movement
For the past twenty years or so, TQM has been a growth industry for management
consultancy (Drummond, 1992; McKinsey & Co., 1989). The emergence of TQM in Europe
followed in the wake of growing American interest in Japanese manufacturing pratices which
were proving to be so successful in the world product markets of the 1970s. At this time,
quality management was identified as a major contributing factor to Japan’s competitive
advantage and, as a consequence, the Japanese model of quality management began to diffuse
- 171 -
into Western nations (Pastor, Meindl and Hunt, 1998). The original American quality control
experts, Juran and Deming, became major agents for the spread of TQM to international
management audiences (Oakland, 1989). Consulting firms, as well as government agencies,
through their publications and other type of activities, stimulated interest in TQM and became
the main vehicles for the promotion of TQM in countries such as Britain and France. In both
countries, policy-makers promoted TQM as the key solution to regain competitiveness in the
world market.
3.6.2.1 Britain: Thatcherism and the New Enterprise Culture One of the major problems faced by the Conservatives when they came to power in 1979, was
the effect of Britain’s long-term economic decline on industry and employment. For the
newly elected government, excessive state intervention and trade unionism had made British
industry uncompetitive and weak. The solution was to unleash the entrepreneurial spirit which
Mrs. Thatcher believed had been shackled by years of governmental interference in the affairs
of industry. A new “enterprise culture” had to be created in the country which would
stimulate a more efficient and productive market (Keat and Abercrombie, 1991).
For much of the post-war period, successive governments had provided financial aid, advice
and policy frameworks in trying to produce a modern and internationally competitive
industrial sector (Tiratsoo and Tomlinson, 1993; 1998). But given its opposition to state
intervention, the Conservative government originally sought to reduce its role in industrial
policy. For the new Secretary of State for Industry (Sir Keith Joseph, Mrs Thatcher’s free-
market guru), the government’s role would be restricted to ensuring that the right external
conditions for the self-revival of the market prevailed and that any constraints over its full and
unrestricted operation would be effectively removed. But in the context of the 1980 downturn
in the world economy, Sir Keith found it politically difficult to institute a wholesale
withdrawal of the state from the industrial arena. In 1981, he was replaced as Industry
Secretary, and thus the “limited interventionism” that characterized most of post-war British
industrial policy did not disappear altogether (Atkinson and Lupton,1990: 46).
In 1983, the Department of Trade and Industry (DTI) launched the National Quality
Campaign, with the goal of improving the performance of British industry by increasing its
general awareness of TQM (Lascelles and Dale, 1989). A series of publications and videos on
TQM was produced by DTI and by 1987, DTI officials estimated that since the beginning of
- 172 -
the Campaign, direct contact had been made with over 50,000 companies concerning
information about certification and quality management more generally. The Campaign was
strongly supported by the British Quality Association (BQA), a group of consultants and
businessmen from large corporations (like ICI and Unilever) founded in 1980 to help spread
TQM concepts and practices in industry, and which started in 1984 to administer the British
Quality Award to reward excellence in British business (British Quality Foundation, 1995).
The BQA is the ancestor of the British Quality Foundation, a not-for-profit organization
created with the support of the DTI to improve organizational efficiency through the
promotion of TQM practices.
The 1983 National Quality Campaign was subsequently incorporated into a new policy, the
“Enterprise Initiative” introduced in 1988 following the publication of a White Paper that
relaunched DTI as The Department for Enterprise (Cmnd 278). The DTI was to be at the
cutting edge of Mrs Thatcher’s revolution, championing free-market ideas and encouraging
industry to adopt new attitudes and practices. This was to be achieved by emphasizing the
importance of management, education and technological innovations. An essential element
was the creation of a Single European Market which would provide new opportunities for
British exports and force British industry to become more efficient and competitive.
Discussing the White Paper, the DTI Minister (Kenneth Clarke) argued that “the main role of
the DTI… must be… to influence attitudes and to encourage open markets in order to
promote enterprise and prosperity” (Hansard, vol.125, col.145, 12 January 1989). The 1988
White Paper also placed considerable emphasis on the importance of small and medium
businesses as one of the key growth sectors of the economy, and introduced a range of new
incentives to encourage their development. Among such incentives, the “Enterprise Initiative”
provided financial support for small businesses seeking management consulting services in
key areas such as organizational design, marketing and quality management (Hughes, 1993).
Between 1988 and 1995, the DTI received over 138,000 applications from small businesses
seeking financial assistance for the use of management consulting expertise. During this time,
the government spent more than £300 million on the Enterprise Initiative (OECD, 1995: 145).
Under the Initiative, which was later re-named the “Consultancy Scheme”, management
consulting firms could bill up to approximately £5 million a year for consultancy assignments
carried out for the DTI (Burt, 1988: 99).
- 173 -
The Management Consultancies Association (MCA), the trade organization that represents the
business interests of the largest consulting firms in the UK, strongly supported the Initiative
(Hosking, 1987). As we shall see in greater detail later, the MCA developed in the mid-1980s
a lobbying strategy designed to inform Whitehall officials about how member firms could
help build the entrepreneurial culture that the government wanted to foster in the UK. For
instance, the MCA began to hold a series of meetings (four or five a year) attended by
member firms and Permanent Secretaries. The purpose of a such meeting was to receive an
authoritative update on activities within a particular sector of government policy. These
meetings were supplemented by a series of small monthly lunches consisting of senior staff
from member firms and policy-makers. For the MCA, these luncheons “provided an ideal ‘off
the record’ opportunity for wide ranging discussions on subjects of particular interest to both
guests and hosts” (MCA, 1996: 5). In the past, the MCA guests included the head of the
Prime Minister’s Policy Unit, senior Treasury officials, and DTI representatives. The MCA
increasingly sought the company of DTI officials for these occasions as the government began
to develop its new industrial policy in the mid-1980s. As one observer noted soon after the
adoption of that policy, “management consultancy services have recently been given a
considerable shot in the arm through the launch of the Enterprise Initiative to provide
financial assistance for firms with a payroll of fewer than 500 to use the services of
consultants in various areas” (Burt, 1988: 98). In his annual report, the MCA Chairman wrote
that “My association welcomed the recent White Paper DTI -The Department for Enterprise
... This should lead to significant benefits for our clients and thus further opportunities for our
members” (MCA, 1987: 3).
3.6.2.2 France: From Dirigisme to Disengagement In the mid-1980s, after having been elected on an heavily statist or dirigiste platform, the
Socialist government switched its macroeconomic policy from Keynesian expansionism to
stricter monetary policy, as France was implementing the measures required by the European
Union in terms of the opening of borders, the lifting of price controls, the abrogation of most
barriers to competition, and so forth (Hall, 1990). After the resignation of Prime Minister
Mauroy and the resignation of the four Communist ministers from the governing coalition, the
government undertook in 1983 a “Great U-turn” in the management of the economy and
adopted a policy of economic austerity to dampen inflation and reduce the deficit – the size of
which had significantly increased as a result of the nationalization programme introduced in
- 174 -
1981 (Durupty, 1988). This shift in policy signalled the beginning of a major transformation
from a state-directed economy to a more market-oriented one (Schmidt, 1996).
A reflection of this shift was the growth, in the early 1980s, of an important movement
promoting TQM and the implemention of quality circles in private sector organizations
(Chevalier, 1991). At the heart of this movement was the Association française des cercles de
qualité (AFCERQ), an organization created in 1981 by management consultants and staff
managers in large companies. In 1983, about 360 companies were members of the AFCERQ,
whose mission was to promote TQM ideas and to help companies develop quality circles
(Juran and Gryna, 1988: 35 c.7). During that period, some of the largest French-based
management consulting firms were very active in diffusing TQM ideas by publishing “recipe
books” designed to help managers introduced quality circles in their company .
Starting in 1984, the Ministère de l’Industrie adopted a number of measures for raising the
awereness of TQM in industry. For instance, the Department introduced the Fonds régionaux
d’aide aux conseils (FRAC) - or the Regional Funds for Aid to Firms Calling on Consultancy
Services - to provide financial support to small and medium enterprises (SMEs) so that they
could use management consulting services as a way to improve their efficiency. When it was
established in 1984, the FRAC was supposed to help SMEs to call on consultants to
implement initatives in the area of TQM (OECD, 1995: 121). Generally, more than 40 per
cent of the money spent for FRAC aid went to projects in the area of quality management
(OECD, 1995: 124). In 1993, 3,060 applications for FRAC aid were approved for a total
amount of 173 million francs distributed among the consulting firms involved in FRAC
operations (OECD, 1995: 124).
In the process of developing its FRAC policy, the Department of Industry found that French
businesses were not using management consulting services as much as their American, British
or German counterparts (Saint-Martin, 1998). The lack of professionalism in consulting was
identified as one reason why the demand for such services was not strong in industry (Sauviat,
1991). So while the FRAC were intended to act on the demand side of the equation by
providing financial aid for buying consulting services, the government also sought to act on
the supply of consulting services by helping to develop the professionalism of consultants
(Salvall, 1992). It is thus that the operation Développement du professionnalisme des
consultants was born in 1985 and that the Office Professionnel de Qualification des Conseils
- 175 -
en Management (OPQCM) started its activities in 1987. The OPQCM is a certifying agency.
It is under the responsibility of the Department of Industry, and its purpose is to promote
management consultancy and to act, vis-à-vis potential clients, as a reference to facilitate the
selection of management consulting firms.
The FRAC are administered locally by municipal governments. They are part of the new
functions devolved to local governments as a result of the 1982 decentralization policy, which
transfered from Paris to local authorities new powers in policy sectors as varied as regional
economic planning, industrial development, social services and so forth (Schmidt, 1991). The
1982 decentralization reforms gave to local governments new financial resources directly
through the transfer of state taxes and guaranteed others through a system of block grants
(Richard, 1988). As a result, the financial capacity of local government became much more
important than in the past. Total local government expenditures almost doubled in six years,
from 300 billion francs in 1981 to 600 billion in 1990. Following the 1982 decentralization,
local officials increasingly sought the services of management consultants to help them
develop the practices and systems needed for managing the new functions and resources they
inherited from the central state. As one article on management consultants noted in Le
Monde, “la décentralisation a ouvert aux consultants le marché des collectivités locales”
(Chirot, 1993: 17).
3.6.3 Using consultancy: TQM ideas in the public sector
If TQM ideas became influential and widely used in commerce and industry, this was not
purely because of of their innate or intellectual qualities alone. As the previous section
showed, state policies played a major role in facilitating the dissemination of TQM techniques
in small and medium businesses. And to spread the TQM gospel, governments in both Britain
and France mobilized management consultants, encouraging private entrepreneurs to use
their services as a way to enhance organizational efficiency and performance. In the eyes of
consultants, government promotion of their services, was a “recognition of the benefits of
consultancy” as the Chairman of the Management Consultancies Association (MCA) in the
UK argued after the adoption of the Enterprise Initiative (MCA, 1987: 3).
Not everyone agreed about the “benefits” of management of consultancy, however. In the UK
for instance, soon after the introduction of the Enterprise Initiative, the Labour Party’s
- 176 -
research organization, the Labour Research Department (LRD), released a very critical study
on management consultancy arguing that consultants were being used to bypass trade unions
and weaken bargaining power. The LRD study (based on a survey of trade union
representatives) said that consultants were politically biased and that in many cases, they were
a “total waste of money” (LRD, 1988). The study found several instances where the
consultants’ own lack of expertise resulted in “chaos” (Naughton, 1988).
Whether management consultancy “creates wealth” as consultants themselves like to claim, or
leads to “chaos” as critics argue, is an open question. What this shows, however, is that
management consultancy is a highly contested field of activity and knowledge. One only
needs to look at the titles of popular books such as The Witchdoctors, Con Tricks or So-
Called Experts to see that consultants suffer from a significant credibility problem. But while
not everybody agrees about the usefulness of management consultancy, both Britain and
France clearly “took a side” in that debate by implementing policies that made a direct causal
connection between the use of management consultancy and improved industrial efficiency
and competitiveness. Through such policies, the French and British state played what
organizational sociologists call a “social legitimation” role vis-à-vis management consultancy
(Alvarez, 1996: 81). It is important to stress this legitimating role in the social construction of
management consulting expertise precisely because it is not a real profession. Unlike other
fields of social scientific knowledge (law, accountancy, etc.), the credibility or relevance of
management consultancy is not established through professionalization processes: the
existence of professional associations that would license –on behalf of the state- as competent
only those who have the proper qualifications. There are long established prejudices against
consultants. Management consultants are often regarded with mistrust and suspicion. Their
claims to authority are often disputed and this has a major impact on whether clients will take
their ideas and advice seriously. In the absence of any real professional status that would help
consultants deal with the credibility problem they often face, the state’s social legitimation
role thus becomes crucial. In the case of management consultancy, this role essentially took
two forms: direct promotion in the industrial policy sector as we have just seen; and use by
government officials of consulting services to help develop and implement TQM practices in
the public sector.
- 177 -
3.6.3 Britain : From Managerialism to Quality Two distinct trends can be seen in the reforms that were introduced in the public sector during
the Thatcher-Major years. The first set of reforms, which began after 1979 until about the
mid-1980s, is frequently referred to as “managerialist” and is characterized by a greater
emphasis on efficiency, privatization, downsizing, cost-cutting, improved responsiveness to
elected officials, and “a tremedous emphasis on new accounting procedures” (Pollitt, 1990:
181). The second trend, which started with the 1988 Next Steps policy, is clearly more
influenced by TQM ideas, and focuses on improved quality of service, improved service
delivery, and greater customer satisfaction. It also emphasizes expanded employee
participation in decision-making. As one leading student of British public administration
noted, “the somewhat crude thrust toward economy and efficiency that was typical of the
1980s in the UK… has been replaced by a more balanced package that also emphasizes
quality, standards, and the ‘empowerment’ of front-line staff” (Pollitt, 1998: 48).
In Britain, the more “managerialist” approach to bureaucratic reform was led by Sir Derek
Rayner, Chief Executive of Marks & Spencer, appointed by Mrs Thatcher in 1979 to advise
her on ways of improving efficiency and eliminating waste in central government. Rayner
was given carte blanche to bring the market disciplines, cost consciousness and most
important, management techniques of the private sector to government. To do so, Rayner was
supported by a small unit known as the “Efficiency Unit”, based in the Prime Minister’s
Office. The Efficiency Unit had a small staff of career civil servants and management
consultants (Metcalfe and Richards, 1990: 9).
One of the most important reform policies that came out of the Unit’s work was the Financial
Management Initiative (FMI), which sought to decentralize decision-making to line
departments and give managers responsibility for managing their own budgets (Cmnd 8616).
To lead the FMI, the government created the Financial Management Unit (FMU) - a small
organization like the Efficiency Unit - located in the Cabinet Office. The FMU was created to
provide the “access to expert advice” that the FMI promised to give to managers and this
expertise largely came from management consultants who formed the majority of those
recruited to work in the FMU. The FMU consisted of six civil servants and eight consultants,
all from MCA member firms : Arthur Andersen, Coopers & Lybrand, Peat Marwick and Hay-
MSL (Russell, 1984: 146-7).
- 178 -
With the implementation of the FMI, “the Management Consultancies Association (MCA)
moved swiftly to consolidate its position by developing its network of contacts within the
civil service” (Smith and Young, 1996: 142). In the early 1980s, while the Department of
Trade and Industry was launching its “National Quality Campaign”, the MCA created within
its organization a “Public Sector Working Party” (PSWP) to develop of a more co-ordinated
strategy for the promotion of management consulting to major government departments.
According to the MCA, “the Group dealing with the public sector has established close links
with departments employing management consultancy services with the intention not only of
establishing a better understanding within Whitehall of the services that we can offer, but of
equal importance, ensuring that our membership is aware of the needs and constraints faced
by Ministries” (MCA, 1989: 4).
The role of the PSWP is to develop channels of communication with, and to promote
consulting to, key actors in policy areas such as industry, health, defence, and government
reform. In the words of the MCA Director, the PSWP ensures that there is “a regular dialogue
between the MCA and members of Cabinet and with senior officials” (MCA, 1995: 3).
Following the example of their business association, MCA member-firms began in the 1980s
to organize various lobbying activities targeted at Whitehall officials and created
“Government Services Division” within their organizational structures. These GSDs are often
made up of public officials who have been hired by consulting firms to consolidate links with
civil servants and to help sell the firm’s ideas (Bakvis, 1997).
It was in the context of the activities planned by the PSWP that the MCA began to organize
the kind of monthly meetings and lunches with key government officials that were briefly
mentioned earlier in the first part of the paper. For the MCA, such events “provided an ideal
‘off the record’ opportunity for wide ranging discussions on subjects of particular interest to
both guests and hosts” (MCA, 1996: 5). In addition, the PSWP is involved, each year, in
putting together half day seminars for public officials on how management consultancy can
help them achieve program objectives. In the past, such seminars were sometimes attended by
no less than 200 civil servants (MCA, 1995: 3). Thus, starting in the mid-1980s, the PSWP
provided a new forum or institutional site through which management consultants and
government officials from various departments could come together on a regular basis to
discuss, learn from each other, and exchange ideas on policy topics of shared interests. As the
DTI was developing its Enterprise Initiative, and as a number of MCA member firms were
- 179 -
intimately involved in the implementation of the FMI, the meetings with government officials
organized by the PSWP began to cover both industrial policy and public sector reform issues,
thus facilitating the transfer of ideas from one policy sector to the other.
This transfer, and the process by which TQM ideas “spilled-over” from the industrial policy
sector to the area of public sector reform, is best reflected in the Next Steps initiative launched
less than a month after the publication of the 1988 White Paper which, as discussed earlier,
sought to place the DTI at the cutting edge of the “new entreprise culture” that the
government wanted to create. The 1988 Next Steps initiative was very much influenced by the
same “new entrepreneurial” thinking that underlied DTI’s White Paper. The Next Steps also
sought to cut bureaucratic regulation as a way for “improving quality of service to the
customer” (Greer, 1994: 124). And like the government’s new approach to industrial growth,
the Next Steps mobilized management consulting knowledge to help unleash the
entrepreneurial spirit of the civil service.
A Treasury guide on Seeking Help from Management Consultants was issued for those
concerned “with the use of consultants for such subjects as... the setting up of Next Steps
agencies” (HM Treasury, 1990: 1). According to the Guide, consultants “can help make
dramatic improvements to the work of Departments” (p.9). Price Waterhouse which, since
1986, had the Prime Minister’s Efficiency Unit former chief of staff as one of its senior
partners, was closely involved in the development of the Next Steps (Greer, 1994: 129). In
1989, Price Waterhouse created within its organization an “Executive Agency Team” which
publishes every year Executive Agencies: Facts and Trends, a document that evaluates the
Next Steps policy and makes recommendations to policy-makers on how to improve the
performance of agencies. In addition, Price Waterhouse has set up a jury that awards an
annual prize for the best managed Next Steps agency (Auditor General of Canada, 1993: C-9).
For big firms like Price Waterhouse and others, such initiatives to promote the firm’s public
sector experience became increasingly important marketing tools as the government became
in the mid-1980s a growing source of revenues.
The Next Steps policy was followed by two other initiatives: the Competing for Quality
programme, and the Citizen’s Charter, both of which were heavily influenced by TQM ideas
and implemented in 1991 by the new Major government. “Management consultants”, the
government subsequently recognized, “have made a significant contribution to the
- 180 -
achievement of several important Government objectives” (Efficiency Unit, 1994: 3). In
1994, Prime Minister Major ordered a review into the government’s use of management
consultants. Entitled the Government’s Use of External Consultants one can read in the report
that
Over the last ten years the Government has substantially increased its use of external consultants. This has happened for a number of reasons. The initial stimulus came in the mid to late 1980s… from several major changes in Civil Service structure and operations - particularly the creation of Next Steps Agencies [and] the Competing for Quality Programme” (Efficiency Unit, 1994: 19).
Throughout the Thatcher-Major era, British government not only encouraged the use of
management consultants in private industry, but also in its own sphere (Saint-Martin, 2000a).
Greater efficiency was the key motive at work. The government basically applied to the
public sector the same logic that it promoted in private industry and during the 1980s, policy-
makers increased their use of management consultants in their attempts at making the
administration of the state more ‘business-like’. Articles appearing in various issues of
Management Consultancy, a monthly journal published by the MCA, noted that “public sector
consultancy is big business” (Corneille, 1994: 27), and that government has become “the most
important source of fee income to the consultancies” (Abbott, 1994: 1). In the late 1980s,
public-sector consultancy grew faster than private sector business and by 1995 was providing
around 25 per cent of the total fee income of the largest consulting firms (James, 1994).
3.6.3.2 France: The 1986 Policy on Quality and Innovation Following the 1982 decentralization policy, local officials increasingly sought the services of
consultants to help them develop the practices and systems required for managing and
coordinating the new powers that came from Paris. Some of the most important players on the
local government scene include firms such as Bossard, CEGOS, Ernst & Young and Price
Waterhouse (Chirot, 1993: 17). According to two senior managers in the Price Waterhouse’s
Paris office, “An increasing number of large local authorities are employing auditing and
consulting firms to advise them on specific areas of their own activity or the activities of their
companies or other related bodies which they control” (Paquier and Towhill, 1991: 13).
French consultancies like Bossard and CEGOS have created in the 1980s “Local
Collectivities Division” within their internal structure and these divisions employ around 30
management consultants each (Abiker, 1996: 22). The use of consulting services by local
authorities became so important in the late 1980s that local officials and consulting firms
- 181 -
began to organize annual conferences entitled “Collectivité locales, du bon usage des
consultants”, intended to share experiences and best practices in the area of local government
consulting (Chirot, 1993: 17). Similarly, in the late 1980s and early 1990s, a number of
publications intended for local government officials began to publish numerous articles
(written by consultants) on how to build successful partnerships with management
consultants.
In the public sector, local governments were the first to experiment with TQM ideas (Pochard,
1995: 49). The introduction of TQM ideas into local government was said to be an almost
“natural” consequence of the decentralization which sought to improve the quality and
responsiveness of public services by making their delivery closer to the citizen-users
(Orgogozo, 1985: 23). Quality circles were first introduced in municipalities such as Lyon,
Angers and Amiens, and also spread in regions, departments and public organizations such as
the Caisse des dépôts (Chevallier, 1988: 133). In experimenting with quality circles, local and
regional bodies were helped by the Association française des cercles de qualité (AFCERQ),
an organization created in 1981 by management consultants and senior executives in large
companies to promote TQM ideas. By March 1985, the number of quality circles
implemented in local governments had become sufficiently large to organize the first national
conference on Les cercles de qualité dans l’Administration (Orgogozo, 1985: 23). The
conference was sponsored by the AFCERQ and attended by management consultants, local
and central government officials, and by the Socialist Minister responsible for Administrative
Reform.
In 1985, following the conference on quality circles in government, the Minister responsible
for Administrative Reform promised that his officials would study the applicability of TQM
ideas for the central administration (reported in Chevallier, 1988: 134). Subsequently, in
January 1986, the AFCERQ created within its organizational structure a “Civil Service
Group” designed to study the transposition of TQM ideas from the local to the central
administration. The translation of these ideas into policies was greatly facilitated when, in
April 1986, following the election of the right-wing coalition of Jacques Chirac, the
government appointed the two consultants who led the AFCERQ as its senior policy advisors
on bureaucratic reform.
- 182 -
Under the Chirac government, administrative reform policy took on first and foremost the
guise of a quality and innovation strategy essentially aimed at enhancing the quality and
productivity of services delivered to the public (Orgogozo, 1987). One month after its
election, the government commissioned studies from two leading private sector management
consultants on innovation and quality in the public service (Orgogozo and Sérieyx, 1989).
One study on quality was directed by Gilbert Raveleau and the other on innovation, by Hervé
Sérieyx. Both were senior partners of the management consulting firm Eurequip and founding
members of the AFCERQ. One management consultant (Raveleau) was appointed as advisor
on quality to the Minister of Economy, Finance and Privatization, Édouard Balladur. The
other (Sérieyx) served as advisor on innovation to the Minister for Administrative Reform,
Hervé de Charette.
On the advice of the two consultants, the policy introduced by the government in 1987 was
primarily based on employee participation in the operational definition of administrative
duties, intra-departmental communication and improved relations with users of public
services (Barouch and Chavas, 1993: 38-9). The new policy was influenced by TQM and
participatory management theories. It was intended to facilitate: (i) the introduction of
“administrative statements” clearly specifying tasks and objectives, and defined by each
departmental head; (ii) the development of “quality” indicators to improve understanding of
user satisfaction; (iii) the setting up of quality circles to impel information flows between the
different statement participants and, finally (iv), the linkage between individual performance
and ancillary monetary awards through the introduction of an employee incentive plan
stemming from “performance contracts” (Rouban, 1989: 455).
Largely implemented by departments themselves, the innovation and quality policy was
loosely supervised by two new organizations: the Observatoire de l’innovation et la qualité
located in the Cabinet office, and the Comité interministérielle sur la qualité made up of 20
ministries operating under the aegis of the Minister of Finance (Rouban, 1989: 460). The
Observatoire was responsible for the diffusion of information pertaining to the introduction of
new management methods in government, private sector and in other countries (Barouch and
Chavas, 1993: 40). The Observatoire consisted of senior officials and representatives of the
AFCERQ, which at that moment was chaired by one of the management consultants
(Raveleau) advising the government on its quality and innovation policy. Following the
creation of the Observatoire, one public administration scholar argued that the penetration of
- 183 -
TQM ideas into the French administration had been greatly facilitated by “la nomination des
dirigeants de l’AFCERQ au coeur de l’appareil d’État” and that the government discourse on
quality was, in fact “que la reproduction, à l’identique, du discours tenu depuis plusieurs
années par l’AFCERQ, promue au rang de laboratoire d’idées” (Chevallier, 1988: 134).
On the surface, the innovation and quality policy has had far-reaching effects, with the
development of several hundred quality circles throughout the French administrative system.
It was estimated that 3,000 quality circles were in existence in the central administration by
1988 (Pochard 1995: 49). Budget appropriations for the development and implementation of
the innovation and quality initiative rose from 10 million Francs in 1987 to 13.6 million in
1988. A portion of that money was spent on management consultants whose services were
increasingly sought by the civil service to appraise the functioning of the quality policy in
departments (Rouban, 1989: 457).
3.6.4 Conclusion: the industrial policy origins of public sector reforms This chapter has tried to present a de-compartmentalized view of the policy process that
stresses the links and connections between industrial policy changes and public sector reform
initiatives. To understand the origins of TQM innovations in the public sector, it has been
important to examine developments that occurred during the 1980s in the industrial policy
sector. Students of public policy often seek to understand changes in a given policy sector by
looking at previous measures or decisions taken in that same policy sector. Students of
economic policy changes will look at the institutions that have jurisdiction over economic
policy-making and study what decision-makers and officials in these institutions have done
before (Furner and Supple, 1990), while others will study how the possibilities for changes in
the education system today are strongly shaped by the legacies of past educational reform
initiatives (Goedegebuure et al., 1993). Policy making is indeed a historical process in which
actors learn from past experiences, but these past policy experiences can be multiple, and they
can come from a variety of policy sectors, not just one.
Industrial policy and public sector reform may, in the past, have been policy sectors very
different and distant from one another, in terms of their concerns, the type of interests they
represent, and the kind of ideas, norms, or intellectual frameworks that guide their policy
thinking. But if such a distance truly existed in the past - and this remains to be seen - it has
- 184 -
undoubtedly been reduced in the 1980s by the ideological rise of the “government should run
like a business” mantra (Beckett, 2000). With the emergence of the New Right in the 1980s,
political leaders such as Thatcher in the UK and Chirac in France came to office convinced
that government had become too big and inefficient. Each sought to improve government by
importing into the public sector management ideas and techniques borrowed from the world
of commerce and industry. Throughout the 1980s, TQM ideas were very popular in the
private sector and, as we have seen, policies designed by government officials in the British
and French Department of Industry played an active role in spreading the TQM gospel in the
two countries. In the process of implementing these policies, industrial policy-makers
mobilized management consultants, with regard especially to measures intended to improve
the perfomance and competitiveness of small and medium businesses. For consultants, these
policies sent a clear signal that policy-makers in government saw their knowledge and
services as important resources to be mobilized in their attempts at fostering a new
‘entrepreneurial culture’. In other words, industrial policies in the 1980s created incentives for
management consultants to organize themselves into associations designed to lobby
government officials. As a result, consultants established channels of communication to the
government and increased their access to decision-makers. And since policy-makers in
government were already convinced of the apparent usefulness of management consultancy in
improving efficiency, it was not long before they applied to the public sector the same or
similar policy approach that they had previously used in the case of TQM and industrial
policy.
Thus, in trying to re-structure the public sector along the lines prescribed by TQM theories,
government officials did not simply follow the lead of the private sector because – in the case
of TQM – the private sector was itself, at least to some extent, led by government. The story
of TQM innovations in the 1980s is not only a private sector-centred story. It is not only a tale
about the successful entrepreneur who is using her/his creativity, skills and imagination to
invent new ways of improving her/his business. It’s also a tale that involves the state and
active government intervention.
History teaches us that there is nothing really new in this (Searle, 1971). At various times of
important socio-economic changes, in order to maintain its competitive location in the world
economy, the state has been involved in the promotion of what Mauro Guillén calls
“management models” (1994). And at least since the birth of Taylorism, efficiency experts
- 185 -
and the other disciples of scientific management who contributed to the foundation of modern
management consultancy have frequently acted as the agents of diffusion of the management
models promoted by the state (Djelic, 1998). So what happened in the 1980s with TQM is not
radically different. But what is new is that this happened in a political context that was anti-
government, even if – paradoxically – government was itself the active promoter of the new
‘entrepreneurial culture’ that celebrated business entrepreneurs and demonized government.
The growth of TQM in the private and public sectors is much less business-centred than one
is led to believe by the political rhetoric of the New Right.
- 186 -
4 Overall Conclusions Not unexpectedly, the overall conclusion of this report regarding the contribution of
consultancies to the creation of European management practice is mixed. On the one hand
there is clear evidence (derived mainly from the surveys, but also from some case studies) that
organizations in Europe have adopted increasingly similar managerial models and templates,
especially during the 1990s. On the other hand, most of the case studies show that the
outcome of this adoption process is far from being homogenous and that considerable variety
remains. This variety – and that is an interesting and possibly unexpected outcome of this
research – is not only nation-, but also to a considerable extent organization-specific. This
finding confirms the importance of internal decision-makers/actors in the process of
management innovation, highlighted in our conceptual framework.
To a certain extent, this overall conclusion is probably a result of the different levels of
analysis. As we have proceeded in our research from the industry to the project level, the
similarity was likely to and has indeed decreased, because the differences become
automatically more apparent when individual cases rather than whole industries or fields are
analysed (cf. Engwall 2000). Nevertheless, the research results presented in this report, allow
us to go beyond this ‘mixed’ conclusion and to make some more specific comments regarding
the role of consultancies in a process which might lead to increasing similarity of
organizational practices in Europe.
First of all, the surveys presented in the first major part of the report showed that the type of
management innovations adopted in European countries has become increasingly similar
during the 1990s and that some of the countries which started this process somewhat belatedly
caught up fairly quickly and intensely during this decade. This is not only the case of the
lesser developed European economies of Spain in Portugal, but also true for Germany which
was widely seen as lagging behind in new management practices at the beginning of the
1990s. At the end of the decade it had not only caught up, but had partially surpassed Britain,
where organizations had had been earlier in adopting most of these practices. It also seems
without doubt that external agents, namely consultants but also public or semi-public
agencies, played an important role in disseminating these management innovations. The case
study on total quality management in the public sector (chapter 3.6.) shows that these
innovations spread beyond the private sector. While government had been originally a
- 187 -
promoter of these measures, it subsequently became an avid adopter and rather intensive user
of consultancy services.
However, the increasing similarity of adoption patterns does not mean that the national
context in which this process takes place has no influence. On the contrary, it appears that
namely the regulatory framework (for example labour legislation) determines not necessarily
whether a management innovation is adopted but to what extent and how this is done (for
example whether or not this involves massive redundancies). As the case of TQM shows,
these differences in national business (and administrative) systems also played a role in the
dissemination of these management innovations to the public sector.
As mentioned above, overall the detailed case studies presented in this report suggest more
caution regarding the increasing similarity of organizational and managerial practices in
Europe and the role of consultancies in the process. Where it is possible to assess the
influence of country variables (namely in the two TQM cases), these seem indeed to play
some role, namely in France and Portugal where the institutional context was less supportive
for the adoption of TQM and for consultants playing a role in this process. More importantly
however, our research shows that the outcome of the adoption process is to a large extent
shaped by the specific conditions within each organization and that it is defined in a complex
process possibly involving external agents (namely consultants), but certainly different actors
from different levels (including management and workers) within the given organization.
The fact that the role of consultants might not be quite as important as widely assumed is
namely highlighted by the Dutch case. Here, banks with a very different history and
sometimes diametrically opposed practices ended up resembling each other fairly closely (by
becoming integrated commercial banks), despite significantly different levels of outside
involvement. Some of them hired American consultants, others Dutch consultants and one
bank, largely refrained from calling in consultants after an initial, rather negative experience.
The case of TQM in the Spanish and Portuguese automobile suppliers leads to a similar
conclusion, form the opposite end. Here, the companies adopted rather different practices,
despite most of them paying lip service to the quality gospel. But once again, this outcome
seems largely independent from the involvement of consultants in the process. It appears that
without the firm commitment of management to introduce a quality control programme, the
use of an external consultant had little to no effect.
- 188 -
In terms of the actual outcome of the adoption process, other variables might therefore be
more important than the involvement of consultants. One of them might be the size of the
‘reference group’: small and national in the case of Dutch banking and Norwegian companies;
small, but international in the case of consumer chemicals – which favoured the adoption of
similar models across national boundaries (cf. for a similar occurrence in the oil industry
Cailluet 2000). Another important variable might be the management model in question.
Since most of the present fashions are little more than fairly vague templates, it is left to the
adopting organization to fill it with meaning. Consultants certainly play a role in this, but they
are only one part of a process involving many other internal and external actors. This is
obvious in the case of TQM, and also becomes apparent in the development of human
resources in Italy. Here, however, personal networks between managers and consultants seem
to have played a considerable role (possibly comparable to the role of Kenning in Norway, cf.
Kvålshaugen and Amdam 2000). If, by contrast, the management model has more stringent
rules, as in the case of certain TQM practices, there is little room for either consultants or
managers to diverge from these. This is especially true, if there is a certification process, in
which consultants actually can come to play an important role.
Regarding future research therefore, it seems to be time to refocus the attention on managers
and other actors within organizations (rather than on consultants) in order to gain further
insights into the creation of European management practice.
- 189 -
5 References Abbott, P. (1994). ‘Government Work Fulfills Expectations’ Management Consultancy,
April, pp.31-34.
Abiker, D. (1996). Les consultants dans les collectivités locales. Paris : Travaux de recherche Panthéon-Assas Paris II.
Abrahamson, E. (1996): “Management fashion”, Academy of Management Review, 21:1, 254-285.
Agostini, A. (1999): “L’Evoluzione del Performance Management”, from Associazione Italiana per la Direzione del Personale (www.aidp.it)
Aldrich, H. E. (1992). ’Incommensurable Paradigms? Vital Signs from Three Perspectives’, in M. Reed and M. Hughes (eds.), Rethinking Organization. New Directions in Organization Theory and Analysis. London: Sage
Allen, S. A. (1978). Organizational Choices and General Management Influence Networks in Divisionalized Companies’. Academy of Management Journal, Vol.21, No.3: 341-365
Alvarez, J. L. (1996). ‘The International Popularization of Entrepreneurial Ideas’, In S. R. Clegg and G. Palmer (eds). The Politics of Management Knowledge. London: Sage, pp.80-98.
Alvarez, J. L. (1998). ’The Sociological Tradition and the Spread and Institutionalization of Knowledge for Action’. In J. L. Alvarez (ed.) The Diffusion and Consumption of Business Knowledge. MacMillan Press
Amatori, Franco (1997): “Italy: The tormented rise of organisational capabilities between government and families”, in A. D. Chandler et al. (eds), Big Business and the Wealth of Nations. New York: Cambridge University Press, pp.246-276.
Amdam, Rolv Petter (1999), Utdanning, økonomi og ledelse: Fremveksten av den økonomisk-administrative utdanningen 1936-1986, Oslo: Unipub
Amorim, C (2000b): International popular management ideas into practice. University of Reading Discussion Paper in Economics and International Business (forthcoming).
Amorim, C. (1999): Bridging the Gap – The Evolution of the Consultancy Business in Portugal and Spain, The University of Reading, Discussion Papers in International Investment and Management, Series B, XI, No. 265.
Amorim, C. (2000a): “TQM: the institutionalisation of a practice”, EGOS, Paper presented at “EGOS- 16th Colloqium, Helsinki, 2- 5th July 2000).
Amorim, C. (2001): The Diffusion of Innovations: the role of multinationals and consultants and the case of management practices. PhD Thesis. (forthcoming).
Andersen, Håkon With (1989), Fra det britiske til det amerikanske produksjonsideal, Trondheim: Tapir
Andreasen, L., Coriat, B., Den Hertog, F. and Kaplinsky, R. (eds.) (1995): Europe's next step: organisational innovation, competition and employment. Illford.
Armbrüster, T. and Kipping, M. (1999): The Management Consultancy Field in Western Europe.CEMP Report, July.
- 190 -
Armbrüster, Thomas and Matthias Kipping (2001): Types of knowledge and the client–consultant interaction. In K. Sahlin-Andersson and L. Engwall (eds.), The Expansion of Management Knowledge: Carriers, ideas and circulation, Stanford, Stanford University Press, forthcoming.
Arnoldus, D. (2000). ‘The role of consultancies in the transformation of the Dutch banking sector, 1950s to 1990s’. Entreprises et Histoire, 25 (October): 65-81.
Ashford, Martin (1998): Con Tricks: The World of Management Consultancy and How to Make it Work for You. London: Simon & Schuster.
Atkinson, B. and C. Lupton (1990). ‘Towards an Enterprise Culture? Industrial and Training Policy under the Conservatives’, In Savage, S. P. and L. Robins (eds). Public Policy and Thatcher. London: Macmillan, pp.45-59.
Aucoin, P. (1990). ‘Administrative Reform in Public Management: Paradigms, Principles, Paradoxes and Pendulums’, Governance, (3): 2, pp.115-137.
Auditor General of Canada (1993). Report of the Auditor General of Canada to the House of Commons. Ottawa: Supply and Services Canada.
Bakvis, H. (1997). ‘Advising the Executive: Think Tanks, Consultants, Political Staff and Kitchen Cabinets’, In Weller, P., Bakvis, H. and R. A. W. Rhodes (eds). The Hollow Crown. London: Macmillan, pp.84-125.
Barley, S.R. and Kunda, G. (1992): “Design and Devotion: Surges of Rational and Normative Ideologies in Managerial Discourse”, Administrative Science Quarterly 37, pp. 363-399.
Barouch, G. and H. Chavas (1993). Où va la modernisation? Dix années de modernisation de l’administration d’État en France. Paris : L’Harmattan.
Becker, C. and Vitols, S. (1997): Innovationskrise der deutschen Industrie? Das deutsche Innovationssystem der neunziger Jahre. In: Naschold, F., Soskice, D., Hancké, B. and Jürgens, U. (eds.): Ökonomische Leistungsfähigkeit und institutionelle Innovation: das deutsche Produktions– und Politikregime im globalen Wettbewerb. Berlin, pp. 251–268.
Beckett, J. (2000). The ‘Government Should Run Like a Business’ Mantra’, Administration & Society, (30): 2, pp.185-204.
Bellmann, L., Duell, H., Kuehl, J., Lahner, M. und Lehmann, U. (1996): Flexibilität von Betrieben in Deutschland. Ergebnisse des IAB-Betriebspanels 1993-1995. Nürnberg. In: Beiträge zur Arbeitsmarkt- und Berufsforschung.
Bender, C. (1996): Innovation by half-measures in German manufacturing. Critique of industrial restructuring from the perspective of social innovation. In: Journal of Industry Studies, Vol. 3, No. 3, pp. 153-162.
Bennet, R.J. and Robson, P.J.A. (1999b): “The use of external business advice by SMEs in Britain”. Entrepreneurship and Regional Development, 11, 155-180.
Bennett, R. J., Wicks, P. and McCoshan, A. (1994): Local empowerment and business services. Britain's experiment with Training and Enterprise councils. London.
Bennett, R.J. and Robson, P.J.A. (1999a): “Business link: use, satisfaction and comparison with business shop and business connect”. Policy Studies, 20: 2, 107-131.
Bennett, R.J., Robson, P.J.A. and Bratton, W.J.A. (2000): “Government advice networks for SMEs: an assessment of the influence of local context on Business Link use, impact and satisfaction”. Applied Economics, forthcoming.
- 191 -
Benson, P.G., Saraph, J.V. and Schroeder, R.G. (1991): “The effects of organisational context on quality management: an empirical investigation.” Management Science, 37:9, 1107-1124.
Benson, P.G., Saraph, J.V., Schroeder, R.G. (1991): “The effects of organizational context on quality management: an empirical investigation”, Management Science, 37:9, 1107-1124.
Bessant, J. and Rush, H. (1995): “Building bridges for innovation: the role of consultants in technology transfer”, Research Policy, 24, 97-114.
Bigazzi, D., (1997), “Modelli e pratiche organizzative”, in Annali della Storia d’Italia, Torino: Einaudi, pp.899-994.
Bloomfield, Brian P., and Ardha Danieli (1995): “The Role of Management Consultants in the Development of Information Technology: The Indissoluble Nature of Socio-Political and Technical Skills.” Journal of Management Studies 32 (1): 23-46
Boisot, M. (1993): “The revolution from outside-Spanish management and the challenges of modernisation”, in D.J. Hickson (ed.): Management in Western Europe: Society, Culture and Organisation in Twelve Nations, Berlin, De Gruyter.
Boland, R. J., and R. V. Tenkasi (1995): Perspective Making and Perspective Taking in Communities of knowing. Organization Science, 6(4)
Braczyk, H.–J. (1994): Organisationswandel und Regulationsstruktur – Das Beispiel Baden–Württembergs. In: Weber, H. (ed.): Lean Management – Wege aus der Krise. Organisatorische und gesellschaftliche Strategien. Wiesbaden, pp. 103–122.
Braczyk, H.–J. and Schienstock, G. (eds.) (1996): Kurswechsel in der Industrie. Lean Production in Baden–Württemberg. Stuttgart.
Braczyk, H.–J., Cooke, P. and Heidenreich, M. (eds.) (1998): Regional Innovation Systems. The role of governances in a globalized world. London.
Brehm, Jack W., and Arthur R. Cohen, (1962): Explorations in Cognitive Dissonance. New York: Wiley
Brennan, R. and Turnbull (1999): “Adaptive behavior in buyer-supplier relationships”, Industrial Marketing Management, 28, 481-495.
British Quality Foundation (1995). Early History, 1992-1994. London.
Brown, J. S. and P. Dunguid (1994): Organizational learning and communities-of-practice: toward a unified view of working, learning and innovation. In: New Thinking in Organizational Behaviour. Oxford, Butterworth Heinemann.
Brunsson, Nils (1989): The Organization of Hypocrisy: Talk, Decisions and Actions in Organizations. Chichester: Wiley
Brunsson, Nils, and Kerstin Sahlin-Andersson (2000): “Creating Organizations”. Organisation Studies
Bruton, K. (1994): “The business culture in Spain”, in C. Randlesome et al. (eds.): Business Cultures in Europe, 2nd ed., Oxford, Butterworth Heinemann.
Bryson, J.R. (1997): “Business service firms, service space and the management of change”, Entrepreneurship and Regional Development, 9, 93-111.
- 192 -
Buesa, M. and Molero, J. (1998): Economia Industrial de Espana: organizacion, tecnologia e internacionalizacion, Madrid, Biblioteca Civitas Economia y Empresa, Coleccion Economia, Editorial Civitas.
Bullinger, H.–J., Roos, A. and Wiedmann, G. (1994): Amerikanisches Business Reengineering oder japanisches Lean Management? In: Office Management, July/August 1994, pp. 14–20.
Burgelman, R. A. (1983). ’Corporate Entrepreneurship and Strategic Management: Insights from a Process Study’. Management Science, Vol.29, No.12: 1349-1364
Burrell, Gibson, and Gareth Morgan, (1979): Sociological Paradigms and Organisational Analysis: Elements of the Sociology of Corporate Life. London: Heinemann
Burt, T. (1988). ‘Management Consultancy: A Special Report’, Accountancy (August), pp.94-100.
Cailluet, L. (1995). ‘Stratégies, structures d'organisation et pratiques de gestion de Pechiney des années 1880 à 1971’. Doctoral dissertation. University of Lyon II.
Cailluet, L. (2000), ‘McKinsey, Total-CFP et la M-Form. Un exemple français d’adaptation d’un modèle d’organisation importé’. Entreprises et Histoire, 25: 26-45.
Carreras, A. and Tafunell, X. (1997): “Spain: big manufacturing firms between state and market, 1917-1990”, in A.D. Chandler et al. (eds.): Big Business and the Wealth of Nations, Cambridge, Cambridge University Press, pp. 277-304.
Casper, S. and Hancké (1999): “Global quality norms within national production regimes: ISO 9000 standards in the French and German car industries”. Organization Studies, 20:6, 961-985.
Castronovo V. (1980), L’industria italiana dall’Ottocento ad oggi, Milano: Mondadori.
Castronovo, V., (1997), “Cultura e sviluppo industriale”, in Annali della Storia d’Italia, Torino: Einaudi, pp. 1280-1296.
Chai, K.H. and Gregory, M.J. (2000): “Knowledge sharing and reuse in international manufacturing networks”. Paper Presented at the IMNet, Cambridge, 3-5 September.
Chandler, A. D. Jr. (1990). Scale and Scope: The Dynamics of Industrial Capitalism. Cambridge, MA: Belknap Press.
Chandler, A.D. (1977): The Visible Hand: the managerial revolution of American business. Cambridge, MA: Harvard University Press.
Chandler, Alfred D. (1962), Strategy and Structure: Chapters in the History of the American Industrial Enterprise, Cambridge, MA: MIT Press
Channon, Derek F. (1973), The Strategy and Structure of British Enterprises, Boston: Division of Research, Graduate School of Business, Harvard University
Chevalier, F. (1991). Cercles de qualité et changement organisationnel. Paris: Economica.
Chevallier, J. (1998). ‘Le discours de la qualité administrative’, Revue française d’Administration publique, (46) : April-June, pp.121-143.
Chirot, F. (1993).’Les élus se font conseiller’, Le Monde, 11 October, p.17.
Clark, T. and Salaman, G. (1995): “Telling tales: management consultancy as the art of story telling”, Grant, D. and Oswick, C. (eds.) Metaphor and Organisations. London: Sage.
- 193 -
Clark, Timothy (1995): Managing consultants: consultancy as the management of impressions. Buckingham: Open University Press.
Clark, Timothy and David Greatbatch (1999): Translating Actors’ Interests: How Management Gurus Understand their Impact and Success. 15th EGOS Colloquium, University of Warwick, 3-5 July.
Clark, Timothy, and Graeme Salaman, (1998): Creating the 'right' impression: towards a dramaturgy of management consultancy’. The Services Industry Journal, 18/1: 18-38
Cohen, W. and Levinthal (1990): “Absorptive Capacity, a new perspective on learning and innovation”, Administrative Science Quarterly, 35, 128-152.
Collins, H.M., 1993: “The Structure of Knowledge.” Social Research 60 (1): 95-116
Coneo, G., 1995: “La Consulenza”, in Lorenzoni G., V., Zamagni, Guida agli sbocchi professionali del laureato in ecomonia, Bologna: Il Mulino, pp. 123-151.
Contu, Alessia, and Hugh Willmott (1999): “Learning and Practice: Focussing on Power Relations.” Paper presented at the Society for Organizational Learning Conference, Cambridge, Mass., 8-9 October 1999
Cooke, P. 1996: Der baden-württembergische Maschinenbau: Regionale Antworten auf globale Bedrohungen. In: Braczyk, H.-J./Schienstock, G. (eds.): Kurswechsel in der Industrie. Lean Production in Baden–Württemberg. Stuttgart, pp. 52-68.
Cooke, P. and Morgan, K. (1994): The regional innovation system in Baden-Württemberg. In: International Journal Technology Management, Vol. 9, Nos 3/4, pp. 394-429.
Corneille, J. (1994). ‘The Pros and Cons of Public Duties’, Management Consultancy, March, p.27.
Cowan, R. and Foray, D. (1997): “The economics of codification and the diffusion of knowledge”, Industrial and Corporate Change, 6:3, 505-622.
Crucini, C, (1999), “From Personal to Inter-Organisational Networks: the Flow of Management Knowledge in Italy”, paper for subtheme 4 “Knowledge Management: Production, Training and Diffusion” at the 15th Egos Colloquium at Warwick University, United Kingdom, 4-6 July 1999.
Crucini, C. (1999/2000), “The Evolution of the Italian Management Consultancy Market”, The University of Reading, Discussion Paper in Economics and Management, Series A, Vol. XII, no. 413.
Crucini, C. and M., Kipping, (2001), “Management Consultancies Global Change Agents? Evidence from Italy”, Journal of Organisational Change Management, forthcoming.
Cunha, R.C. and Marques, C.A. (1995): “Portugal”, in I. Brunstein (ed.): Human Resources Management in Western Europe, Berlin, de Gruyter.
Czarniawska, B. and Joerges, B. (1996): “Travel of ideas”, Czarniawska, B. and Sevón, G. (eds.) Translating Organizational Change. Berlin, New York: de Gruyter, 13-48.
Czarniawska, Barbara, and Guje Sevón, (eds.) 1996: Translating Organizational Change, Berlin: de Gruyter.
Czarniawska-Joerges, Barbara (1990): “Merchants of Meaning: Management Consulting in the Swedish Public Sector.” In: Barry A. Turner (ed.), Organizational Symbolism. New York: de Gruyter, pp. 139-150.
- 194 -
D’Angelo, D., 1996: “Lo sviluppo dell’azienda italiana”, in GEA Consulenti Associati, Management Made in Italy. Il modello delle imprese italiane di successo. Milano: Il Sole 24 Ore Libri, pp.25-45.
d’Iribarne, Philippe (1993), La logique de l'honneur. Gestion des entreprises et traditions nationales, 2nd ed. with a new introduction, Paris, Seuil.
Dacin, M. Tina, Marc J. Ventresca, and Brent D.Beal, 1999: “The Embeddedness of Organizations: Dialogue & Directions.” Journal of Management 25 (3): 317-356
Dale, B.G. and Oakland, J. (1991): Quality Improvement Through Standards. Leckhampton: Stanley Thornes Publishers Ltd.
Dankers, J., van der Linden, J. and Vos, J. (2001). Spaarbanken in Nederland, 1817-1990. Ideeen en organisatie. Amsterdam/Meppel, Boom.
Davis, G. F., Diekmann, K. A. and Tinsley C. H. (1994). ’The Decline and Fall of the Conglomerate Firm in the 1980s: The Deinstitutionalization of an Organizational Form’. American Sociological Review, Vol.59: 547-570
Derossi, F., (1982), The technocratic illusion : a study of managerial power in Italy, New York : Sharpe.
Deutschmann, C. (1993): Unternehmensberater - eine neue „Reflexionselite“?. In: W. Müller-Jentsch (ed.), Profitable Ethik - effiziente Kultur: neue Sinnstiftungen durch das Management? München, pp. 57-82.
DiMaggio, P. (1988). ’Interest and Agency in Institutional Theory”. In L.G.Zucker (ed.) Institutional Patterns and Organizations: Culture and Environments. Cambridge, Mass.: Ballinger
DiMaggio, P.J. and Powell, W.W. (1983): “The iron cage revisited: Institutional isomorphism and collective rationality in organisational fields”, American Sociological Review, 48, 147-160.
DiMaggio, Paul J. (1997): “Culture and Cognition.”, Annual Review of Sociology 23: 263-289
DIW (1996): Keine Dienstleistungslücke in Deutschland – Ein Vergleich mit den USA anhand von Haushaltsbefragungen. In: DIW–Wochenbericht, No. 14/1996. Berlin, pp. 221–226.
Djelic, M. L. (1998). Exporting the American Model: The Postwar Transformation of European Business. Oxford: Oxford University Press.
Dodgson, M. (1993): Organizational Learning: A Review of some Literatures. In: Organization Studies, Vol. 14, No. 3, pp. 375–394.
Douglas, Thomas J. and Judge, William Q. (2001): “Total Quality Management implementation and competitive advantage: the role of structural control and exploration”. Academy of Management Journal, 44:1, 158-169.
Dowd, T. J. and Dobbin F. (1997). ’The Embedded Actor and the Invention of Natural Economic Law: Policy Change and Railroader Response in Early America’. In S. Christensen, P. Karnøe, J. S. Pedersen and F. Dobbin (eds.), American Behavioral Scientist, Vol. 40, No. 4: 478-489
Dreher, C. et al. (1995): Neue Produktionskonzepte in der deutschen Industrie: Bestandsaufnahme, Analyse und wirtschaftspolitische Implikation. Heidelberg.
- 195 -
Drummond, H. (1992). The Quality Movement: What TQM is Really All About. London: Kegan Page.
Durupty, M. (1988). Les privatisations. Paris: La documentation française.
Dyer, J.H. and Singh, H. (1998): “The relational view: cooperative strategy and sources of interorganizational competitive advantage”, Academy of Management Review, 23:4, 660-679.
Ebbinhaus, B. and Visser, J. (1997): Der Wandel der Arbeitsbeziehungen im westeuropäischen Vergleich. In: Hradil, S./Immerfall, S. (eds.) Die westeuropäischen Gesellschaften im Vergleich. Opladen, pp. 333–376.
Edgren, J., Rhenman E. and Skärvad P-H. (1983) “Divisionalisering och därefter. Erfarenheter av decentraliserad organisastion i sju svenska företag”, Stockholm: Management Media
Edquist, C. (1997): Systems of Innovation: technologies, institutions and orgnizations. London/Washington.
Edquist, C. (1999): Innovation Policy - A systemic Approach. In: Paper presented at The European socio-economic Research Conference: The Globalising Learning Economy. Major socio-economic trends and European innovation policy. 28-30 April. Brussels.
Efficiency Unit (1994). The Government’s Use of External Consultants. London: HMSO.
EIMS/European Commission (1996): International Transfers of Organisational Innovation. EIMS Publication, No. 45.
Eliassen P. and B. Aa Strøm (1989), Av egen kraft: Hydro Aluminium Karmøy Fabrikker 1963-1988, Karmøy: Norsk Hydro
Engeström, Yrjö, 1987: Learning by Expanding. Helsinki: Orienta-Konsultit
Engwall, L. and Kipping, M. (2002). ‘Introduction: Management consulting as a knowledge industry’, in Kipping and Engwall (eds.), Management consulting, forthcoming.
Engwall, Lars (1999): The Carriers of European Management Ideas. CEMP report no. 7, Department of Business Studies, Uppsala University, Sweden.
Engwall, Lars, and Carin Eriksson (1999): “Advising Corporate Superstars. CEOs and Consultancies in Top Swedish Corporations.” Paper presented at the 15th EGOS colloquium, Warwick University, 4-6 July.
Engwall, Lars, and Vera Zamagni (eds.) (1998): Management Education in Historical Perspective, Manchester, Manchester University Press.
Engwall, Lars, Rolv Petter Amdam, José Luis Alvarez and Matthias Kipping, 1997: The Creation of European Management Practice. A Proposal to the European Commission.
EU, Panorama of EC Industry: Management Consultancy, several issues (1989-1996). Luxembourg, Official Publications of the EU.
Faliva, G., Pennarola F., (1992), Storia della consulenza di direzione in Italia, Milano: Olivares.
Faust, M. (1999): The Increasing Contribution of Management Consultancies to Management Knowledge: The Relevance of Arenas for the Communicative Validation of Knowledge. Paper presented at the Subtheme 4 “Knowledge of Management:
- 196 -
Production Training and Diffusion” at the 15th EGOS Colloqium at Warwick University.
Ferreira, J.M.C. (1991): “Novas tecnologias e tendências de mudança organizacional do trabalho em Portugal”, Organizações e Trabalho, 516, December.
Festinger, Leon, 1957: A Theory of Cognitive Dissonance. Stanford: Stanford University Press
Fincham, R. (1995). ’Business Process Reengineering and the Commodification of Managerial Knowledge’. Journal of Marketing Management, Vol. 11, No.7: 707-719
Fincham, R. (1999): “The consultant-client relationship: critical perspectives on the management of organisational change”, Journal of Management Studies, 36:3, 335-351.
Fincham, Robin (1999): Extruded management: contradiction and ambivalence in the consultancy process. Paper presented at the Critical Management Studies Conference, 14-16 July 1999, Manchester University.
Fligstein, N. (1985): “The spread of the multidivisional form among large firms, 1919-1979”. American Sociological Review. 50, 377-391.
Fligstein, Neil (1990), The Transformation of Corporate Control, Cambtridge, MA and London: Harvard University Press
Florida, Richard, and Martin Kenney (1991). “The Transfer of Japanese Industrial Organization to the US.” American Sociological Review 56: 381-398
Ford, J. D. and Baucus, D. A. (1987). ’Organizational Adaption to Performance Downturns: An Interpretation-Based Perspective’. Academy of Management Review, Vol.12, No.2: 366-380.
Foster, C. D. and F. J. Plowden (1996). The State Under Stress. Buckingham: Open University Press.
Fraunhofer Institut fuer Arbeitswirtschaft und Organisation (ed.) (1995): Business Reengineering: Aktuelle Managementkonzepte in Deutschland: Zukunftsperspektiven und Stand der Umsetzung. Stuttgart
Freeman, C. (1998): The economics of technical change. In: Archibugi, D./Michie, J. (eds.): Trade, growth and technical change. Cambridge, pp. 16–54.
Fridenson, P., (1994): La circulation internationale des modes manageriales. In: Bouilloud, J.-P., Lecuyer, B.P. (eds.), L’invention de la gestion. Histoire et pratiques. Paris: L’Harmattan, pp.81-89.
Furner, M. and B. Supple (1990). The State and Economic Knowledge. Cambridige, MA: Cambridge University Press.
Gagliardi, P., and Barry A. Turner, 1997: “Aspects of Italian Management”, in David J. Hickson (ed.), Exploring management across the world, London: Penguin, pp.149-164.
Gagliardi, P., Barry, A. Turner, (1997), “Aspects of Italian Management”, in Hickson, David J., Exploring management across the world, London: Penguin, pp.149-164.
Gallino, L., (1997), “Il ricercatore sociale e l’impresa”, in Annali della Storia d’Italia, Torino: Einaudi, pp. 1298-1330.
Gammelsæter, H (1994) “Divisionalisation: Structure or process? A Longitudinal Perspective”, Scandinavian Journal of Management, Vol.10:331-346
- 197 -
Gammelsæter, H (1999) “Lessons from the diffusion of the divisionalised form of organisation. Towards an institutional framework for studying knowledge diffusion”, Paper to CEMP workshop on Management Consultants and Management Knowledge, Reading
Gammelsæter, H. (1991). ‘Organisasjonsendring gjennom generasjoner av ledere. En studie av endringer i Hafslund Nycomed, Elkem og Norsk Hydro’ (Doctoral dissertation), Molde: Møreforsking, Rapport 9114
Gammelsæter, H. (1994). ’Divisionalization. Structure or Process?’ Scandinavian Journal of Management, Vol. 10: 331-346
Gammelsæter, H. (1999), ’Consulting at the Back of Beyond’, paper presented to the 15th EGOS Colloquium, 4-6 July, The University of Warwick, UK
Gammelsaeter, H. (2002). ‘Managers and consultants as embedded actors: evidence from Norway’, Kipping and Engwall (eds.), Management consulting, forthcoming.
Gemelli, G. (1995): “American Influence on the European Management Education: The Role of the Ford Foundation”. European University Institute Working Paper RSC No. 95/3, Florence.
Gemelli, G. (ed.) (1997): Scuole di management. Origini e primi sviluppi delle business schools in Italia, Bologna: Il Mulino.
Gemmerich, Marcus, and Jan Stratmann (1998): Wissensmanagement in der Praxis. Technologie und Management 1/1998, pp. 24-27
Gilgeous, V. and Chambers, S. (1999): “Initiatives for managing resistance to change”. Journal of General Management. 25:2, 44-58.
Goedegebuure, L. et al. (1993). Higher Education Policy : An International Comparative Perspective. Oxford: Pergamon Press.
Goodman, P. S., and L. B. Kurke, (1982): Studies of Change in Organizations: A Status Report. In P. S. A. Goodman (ed.), Change in Organizations. San Francisco: Jossey-Bass Publishers, pp. 1-45
Grant, R.M., Almeida, P. and Song, J. (2000): “Knowledge and the multinational enterprise”, Millar, C., Grant, R,R. and Choi, C. (eds.) International Business: Emerging Issues and Emerging Markets. London: MacMillan, 102-129.
Greenwood, R. and Hinings, C. R. (1996). ’Understanding radical organizational change: Bringing together the old and the new institutionalism’. Academy of Management Review, Vol.21, No.4: 1022-1054
Greer, P. (1994). Transforming Central Government: The Next Steps Initiative. Buckingham: Open University Press.
Greiner, L. E., and R. O. Metzger, (1983): Consulting to Management. Englewood Cliffs, N.J.: Prentice Hall.
Guillén, M.F. (1994): Models of Management. Work, Authority and Organization in a Comparative Perspective. Chicago:The University of Chicago Press.
Guillén, Mauro F., and Guler, Isin (2000): “Global competition, institutions, and organizational change: the international diffusion of the ISO 9000 Quality standards”, Wharton School Discussion Papers.
- 198 -
Hackman, J.R. and Wageman, R. (1995): “Total quality management: empirical, conceptual, and practical issues”, Administrative Science Quarterly, 40, June, 309-342.
Hall, P. A. (1990). ‘The State and the Market’, In Hall, P. A., Hayward, J. and H. Machin (eds). Developments in French Politics. London: Macmillan, pp.171-187.
Hammer, M. and Champy, J. (1993). Re-engineering the Corporation: A Manifesto for a Business Revolution. New York: HarperCollins
Hammer, M. and Staunton, S. (1999). ‘How Process Enterprises Really Work’. Harvard Business Review, Vol.77, No.6: 108-118
Hannan, M. and Freeman, J. (1984): “Structural inertia and Organizational change”. American Sociological Review. 49, 149-164.
Hansen, Morton T., Nihtin Nohria, and Thomas Tierney, (1999): “What’s your Strategy for Managing Knowledge?”, Harvard Business Review, March-April, pp.106-116.
Hatchuel, Armand, and B. Weil (1995): Experts in Organizations - A Knowledge-Based Perspective on Organizational Change. Berlin: Walter de Gruyter.
Havelock, R.G. et al., (1969): Planning for Innovation. A Comparative Study of the Literature on the Dissemination and Utilisation of Scientific Knowledge. Ann Arbor: University of Michigan.
Heidenreich, M. (1998): Arbeit und Management in den westeuropäischen Kommunikationsgesellschaften. In: Hradil, S./Immerfall, S. (eds.): Die westeuropäischen Gesellschaften im Vergleich. Opladen, pp. 289–232.
Helmich, D. L. and Brown W. B. (1972). ‘Successor Type and Organizational Change in the Corporate Enterprise’. Administrative Science Quarterly, Vol.17: 371-381.
Hickson, D. 1993 (ed.): Management in Western Europe. Society, culture and organization in twelve nations. Berlin/New York.
Hickson, D.J, Hinings, C.R., Lee, C.A., Scheck, R.E, and Pennings, J.M. (1971) “A”Strategic contingencies” theory of intraorganisational power”, Administrative Science Quarterly: 216-229
Hilger, S. (2000). ‘American Consultants in the German Consumer Chemical Industry: The Stanford Research Institute at Henkel in the 1960s and 1970s’, Entreprises et Histoire, 25 (October): 46-64.
Hilger, S. (2002). “Reluctant Americanisation? The reaction of Henkel to the influences and competition from the United States”, in A. Kudo et al. (eds.), America as Reference? German and Japanese Industry during the Boom Years, forthcoming.
Hill, Stephen (1991): “Why Quality Circles Failed but Total Quality Management Might Succeed.” British Journal of Industrial Relations 29 (4): 541-568
Hirsch, P. and Lounsbury M. (1997). ‘Ending the Family Quarrel: Towards a Reconciliation of ”Old” and ”New” Institutionalisms’. In S. Christensen, P. Karnøe, J. S. Pedersen and F. Dobbin (eds.), American Behavioral Scientist, Vol. 40, No. 4:406-418
Hofstede, Geert (1980): Culture’s Consequences: International Differences in Work-Related Values, London: Sage.
Hood, C. (1991). A Public Management for All Seasons?’, Public Administration, (69): Spring, pp.3-19.
- 199 -
Hosking, P. (1987). ‘Consultants Take Giant Stride in Popularity’, The Independent, April 23.
Huczynski, A. (1993): Management Gurus: who they are and how to become one, London: Routledge.
Hughes, A. (1993). ‘Big Business, Small Business and the Enterprise Culture’, in Michie, J. (ed). The Economic Legacy, 1979-1992. London: HBJ, Publishers, pp.296-311.
Inácio, A.P. and Weir, D. (1993): “Portugal: a developing country”, in D.J. Hickson (ed.): Management in Western Europe, Berlin, de Gruyter.
Ingraham, P. (1995). ‘Quality Management in Public Organization’, In B. G. Peters and D. S. Savoie (eds). Governance in a Changing Environment. Montreal/Kingston: McGill-Queen’s University Press, pp.239-259.
Inkpen, A.C. and Dinur, A. (1998): “The transfer and management of knowledge in the multinational corporation, considering context: considering context”. Working Papers Carnegie Bosh Institute for Applied Studies in International Management.
Jackall, Robert (1988): Moral Mazes: The World of Corporate Managers. New York: Oxford University Press.
Jackson, Bradley G. (1996): “Re-engineering the Sense of Self: the Manager and the Management Guru.” Journal of Management Studies 33 (5): 571-590
Jaffe, D. T. and Scott, C. D. (1998).’Reengineering in practice: Where are the people? Where is the learning?’ The Applied Journal of Behavioral Science, Vol. 34, No. 3: 250-267
James, M. (1994). ‘Heavyweights in a League of their Own’, Management Consultancy, April, pp.36-38.
Jarrar, Y. F. and Aspinwall, E. M. (1999). ’Business Process Re-engineering: Learning from Organizational Experiences”. Total Quality Management, Vol. 10, No.2: 173-186
Juergens, U. and Naschold, F. (1994): Arbeits– und industriepolitische Entwicklungsengpässe der deutschen Industrie in den neunziger Jahren. In: Zapf, W./Dierkes, M. (eds.): Institutionenvergleich und Institutionendynamik. Jahrbuch des Wissenschaftszentrum Berlin für Sozialwissenschaft. Berlin, pp. 239–270.
Juran , J.M. (1962): “The economics of quality”, Juran, J.M., Seder, L.A., Gryna, F.M. (eds.) Quality Control Handbook. (second edition), New York:McGraw-Hill.1-46.
Juran, J. and F. M. Gryna (1988). Juran’s Quality Control Handbook (4th ed). New York: McGraw-Hill.
Kanter, R. M. (1982). ‘The Middle Manager as Innovator’. Harvard Business Review, July/August.
Katz, R. (1980). ‘Time and Work’. Research in Organizational Behavior, Vol.2: 81-127.
Katz, R. (1982). ‘The Effects of Group Longevity on Project Communication and Performance’. Administrative Science Quarterly, Vol.27: 81-104.
Keat, R. and N. Abercrombie (eds). (1991). Enterprise Culture. London: Routledge.
Keeble, David, and Joachim Schwalbach (1995): Management Consultancy in Europe. ESRC Centre for Business Research, University of Cambridge, Working Paper No. 1, February.
Kesner, Idalene F., and Sally Fowler, 1997: “When Consultants and Clients Clash.” Harvard Business Review, November-December, pp. 22-38
- 200 -
Kieser, A. (1998): “Communication barriers between management science, consultancies and business companies”, Paper presented at EGOS Colloquium Maastricht, Subtheme 7 The Creation and Diffusion of Management Practices.
Kieser, Alfred (1997): “Myth and rhetoric in management fashion”, Organisation, 4 (1), pp. 49-74.
Kieser, Alfred (1998): Unternehmensberater – Händler in Problemen, Praktiken und Sinn. In: Glaser, Horst, Ernst F. Schröder and Axel von Werder (eds.): Organisation im Wandel der Märkte. Wiesbaden: Gabler, pp. 191-225
Kim, D. H. (1993). “The Link between Individual and Organizational Learning.“ Sloan Management Review (Fall): 37-50.
King, N. and Anderson, N. (1995): Innovation and Change in Organizations. London, New York.
Kipping, M. (1996). ‘The U.S. Influence on the Evolution of Management Consultancies in Britain, France and Germany Since 1945’. Business and Economic History, 25/1: 112-23.
Kipping, M. (1998): The hidden business schools. Managment Training in Germany since 1945. In: Engwall, L./Zamagni, V. (eds.): Management education in historical perspective. Manchester, pp. 95-110.
Kipping, M. (1999), “American Management Consulting Companies in Western Europe, 1920 to 1990: Products, Reputation and Relationships”, Business History Review, 73, No. 2 (Summer), pp.190-220.
Kipping, M. (2000). ‘Consultancy and Conflicts: Bedaux at Lukens Steel and the Anglo-Iranian Oil Company’. Entreprises et Histoire, 25: 9-25.
Kipping, M. and .Armbrüster T. (eds.) (1999). ‘The Consultancy Field in Western Europe’, The University of Reading, CEMP Report No. 6.
Kipping, M. and Armbruester, T. (2002). ‘The burden of otherness: limits of consultancy interventions in historical case studies’, in Kipping and Engwall (eds.), Management consulting, forthcoming.
Kipping, M. and Armbrüster, T. (1998): ‘Management consultants and management knowledge’, The University of Reading, CEMP report No. 2, December.
Kipping, M. and Engwall, L. (eds.) (2002). Management consulting: Emergence and dynamics of a knowledge industry. Oxford, Oxford University Press, forthcoming.
Kipping, Matthias, and Celeste Amorim (1999/2000): “Consultancies as Management Schools”, The University of Reading, Department of Economics, Discussion Paper in Economics and Management, Series A, Vol. XII, no. 409.
Kipping, Matthias, Staffan Furusten, and Hallgeir Gammelsaeter (1998/99): Converging towards American dominance? Developments and structures of the consultancy fields in Western Europe. The University of Reading, Discussion Papers in Economics and Management, Series A, Vol. XI, No. 398.
Kirkpatrick, I. And M. Martinez Lucio (eds). (1995). The Politics of Quality in the Public Sector. London: Routledge.
- 201 -
Kogut, B. and Parkinson, D. (1993). “The Diffusion of American Organizing Principles to Europe”, in B. Kogut, ed., Country Competitiveness: Technology and the Organizing of Work. Oxford, OUP, pp.179–202.
Kogut, B. and Zander, U. (1992): “Knowledge of the firm, combinative capabilities , and the replication of technology”, Journal of International Business Studies, 24, 625-645.
Kogut, Bruce and David Parkinson (1998), ‘Adoption of the Multidivisional Structure: Analyzing History from the Start’, Industrial and Corporate Change, Vol. 7, No. 2, pp. 249-273
Kostova, Tatiana (1997): “Success of the transnational transfer of organizational practices within multinational companies”, Paper presented at the conference on Knowledge in International Corporations, Rome, November 6.
Kvålshaugen, R. and Amdam, R. P. (2000). ’Etablering og utvikling av ledelseskulturer: Norsk kenningisme’, Nordiske organisasjonsstudier, Vol. 2, No. 1: 84-106
Lane, C. (1989): Management and labour in Europe: the industrial enterprise in Germany, Britain and France. Aldershot.
Lane, C. (1997): The Governance of interfirm relations in Britain and Germany: Societal or Dominance Effects? In: Whitley, R./Kristensen, P. H. (eds.): Governance at work. The social regulation of economic relations. Paris, pp. 62–85.
Lane, Christel (1995): Industry and Society in Europe. Stability and Change in Britain, Germany and France. Aldershot: Edward Elgar.
Lane, Christel, and Reinhard Bachmann, (1996): The Social Constitution of Supplier Relations in Britain and Germany. Organization Studies 17, No. 3, pp. 365-395.
Lascelles, D. M. and B.G. Dale (1989). ‘The UK Department of Trade and Industry National Quality Campaign: 1983 to 1989’, International Journal of Operations and Production Management, (9): 6, pp.2-45.
Latour, Bruno (1986): “The Powers of Association”, in John Law ed., Power, Action and Belief, London: Routledge and Kegan Paul, pp. 264-280.
Lave, Jean, and Etienne Wenger (1991): Situated Learning: Legitimate Peripheral Participation. Cambridge: Cambridge University Press
Lawler, E.E., Mohrman,S.A. and Ledford, G.E. (1992): Employee involvement and total quality management: Practices and results in fortune 1000 companies. San Francisco: Jossey-Bass.
Levitt, B. and J. G. March (1988): “Organizational Learning.“ Annual Review of Sociology 14: 319 - 340.
Lilja, K. and Laurila J. (1997) “Diffusion of the M-form and its translation: The dominance of engineering expertise in the Finnish forest industry corporations”, Paper to 13th Egos Colloquium, Budapest
Lillrank, P. (1995): “The transfer of management innovations from Japan”, Organization Studies, 16:6, 971-989.
Lincoln, J.R., Ahmadjan, C.L. and Mason, E. (1998): “Organizational learning and purchase-supply relations in Japan: Hitachi, Matshushita and Toyota compared”, California Management Review, 40:3, 241-264.
- 202 -
Lindvall, J. and Pahlberg, C. (1998): Multinationals as Carriers of Management Practice, CEMP Report No.3, December 1998.
Lindvall, Jan, (1999): The Creation of Management Practice: A Literature Review, CEMP Report No. 1 (revised), April.
Løland, Birgitte (1997), ‘Hydro og oljen’ Cand. philol. thesis in history, Univ. of Oslo
Lorenz, Edward and Lazaric, Nathalie (2000): “The transferability of business practices and problem-solving skills to Japanese Firms in Britain and France”. Paper presented at DRUID summer2000 Conference, Rebild, 15-17 June.
LRD: Labour Research Department (1988). Management Consultants: Who They Are and How to Deal With Them. London: LRD.
Lundvall, B.-A. (1992): National Systems of Innovation: Towards a Theory of Innovation and Interactive Learning. London.
Lundvall, B.-A. and Borras, S. (1998): The globalising learning economy: implications for innovation policy. Luxemburg. In: European Commission (ed.) Studies targeted socio-economic research.
Lundvall, B.-A. and Johnson, B. (1994): The learning economy. In: Journal of Industry Studies, Vol. 1, No. 2, pp. 23-42.
Mai, M. (1994): Engpaß Ingenieurqualifikation. Anstöße zu einer notwendigen Reform. In: Weber, H. (ed.): Lean Management – Wege aus der Krise. Organisatorische und gesellschaftliche Strategien. Wiesbaden, pp. 145–155.
Malmberg, A. and Maskell, P. (1999): Localized Learning and Regional Economic Development. In: European and Regional Studies, London, Vol. 6, 1, pp. 5-8.
March, James G. (1991): Organizational consultants and organizational research. Journal of Applied Communications Research, June: 20-31
Mayer, M. and Whittington, R. (2000). ’After the American Challenge: Mapping the European Multidivisional in the Post-McKinsey Era’. Paper for the 16th EGOS Colloquium, Helsinki.
Mayer, Michael C.J., and Richard Whittington (1999), ‘Strategy, Structure and “Systemness”: National Institutions and Corporate Change in France, Germany, and the UK, 1950-1993’, Organization Studies, Vol. 20, No. 6, pp. 933-959
MCA: Management Consultancies Association (1987). Annual Report. London : MCA.
MCA: Management Consultancies Association (1989). Annual Report. London : MCA.
MCA: Management Consultancies Association (1995). Annual Report. London : MCA.
MCA: Management Consultancies Association (1996). Annual Report. London : MCA.
McCabe, Darren and Wilkinson, Adrian (1998): “The rise and fall of TQM: the vision, meaning and operation of change”, Industrial Relations Journal, 29:1, 18-29.
McKenna, Chris. D. (1997) ‘”The American Challenge”: McKinsey & Company’s Role in the Transfer of Decentralization to Europe, 1957-1975, Academy of Management Best Paper Proceedings, pp. 226-331
McKenna, Christopher D. (1995): The origins of modern management consulting. Business and Economic History 25 (1), pp. 51-58
- 203 -
McKinsey & Co. (1989). Management of Quality: The Single Most Important Challenge for Europe. Montreux, Switzerland: European Quality Management Forum.
Metcalfe, L. and S. Richards (1990). Improving Public Management. 2nd ed. London: Sage.
Meyer, J. W. (1994). ’Rationalized Environments’. In W. R. Scott and J. W. Meyer (eds.) Institutional Environments and Organizations. Structural Complexity and Individualism. London: Sage
Meyer, J.W. and Rowan, B. (1977): “Institutionalized organizations: formal structure as myth and ceremony”, American Journal of Sociology, 83, 340-363.
Meyer, John W. (1996). “Otherhood: The Promulgation and Transmission of Ideas in the Modern Organizational Environment.” In: Czarniawska and Sevon, Translating Organizational Change, pp. 241-252.
Meyer-Krahmer, F. (1999): Der Prozeßcharakter von Innovationen In: Meyer-Krahmer, F./Lang, S. (eds.): Geisteswissenschaften und Innovationen. Heidelberg, pp. 45-57. (=Technik, Wirtschaft und Politik, 35).
Micklethwaite, J. and Wooldridge, A. (1996), The Witch Doctors. What the management gurus are saying, why it matters and how to make sense of it, London, Heinemann.
Miles, M.B. and Huberman, M.A. (1994): Qualitative Data Analysis: an expanded sourcebook (second edition), Thousand Oaks, Calif.: Sage Publications.
Miller, D. and Friesen, P. H. (1980). ’Momentum and Revolution in Organizational Adaptation.’ Academy of Management Journal, Vol. 23, No.4: 591-614
Morgan, K. (1996): Umkehrung der Zermürbung. In: Braczyk, H.-J./Schienstock, G. (eds.): Kurswechsel in der Industrie. Lean Production in Baden–Württemberg. Stuttgart, pp. 245-268.
Moseide, Notto (1999), ‘Opprettelsen av Hydros personalavdeling i 1953’, Cand.philol. thesis in history, University of Oslo
Myrvang, Christine (1997), “Falkeblikk og styringsteknikk”, in R.P. Amdam et al., ÅrdAl: Verkeyt og bygda 1947-1997, Oslo: Det norske Samlaget
Naschold, F. (1994): Das deutsche Wirtschaftsmodell auf dem Prüfstand. Herausforderung an Politik und Wirtschaft in den 90er Jahren. In: Landeszentrale für politische Bildung Baden–Württemberg (ed.): Der Bürger im Staat 44, No. 2, pp. 133– 138.
Naschold, F. (1996): Jenseits des baden-württembergischen 'Exceptionalism': Strukturprobleme der deutschen Industrie. In: Braczyk, H.-J./Schienstock, G. (eds.): Kurswechsel in der Industrie, Stuttgart, pp. 184-212.
Naughton, M. (1988). ‘The Chaos Consultants Cause’, Morning Star, London, 20 September.
Nees, D.B. and Greiner, L.E. (1985): “Seeing behind the look-alike management consultants”, Organizational Dynamics, 68-79.
Nelson, R. (ed.) (1993). National Innovation Systems. New York, Oxford.
Nelson, R.R. and Winter, S. (1982): An Evolutionary Theory of Economic Change. Cambridge, MA: Harvard University Press.
Nevins, Mark D., 1998. “Teaching to learn and learning to teach: notes towards building a university in a management consulting firm.” Career Development International, Vol. 3, No.5
- 204 -
Newell, S., Swan, J. and Galliers, R. (1999): “Business process reengineering (BPR): Explaining why BPR has diffused widely despite concerns about its effectiveness”. Comportamento Organizacional e Gestão. 5:2, 367-387.
Nielsen, Micahel M. (1987), ‘Strategi og struktur: Udbredelse af økonomer i dansk industri’, Center for uddannelsesforskning, Handelshøgskolen i København
Nohria, Nihtin, and R. G. Eccles (1998): Where does Management Knowledge come from? In: J. L. Alvarez (ed.): The Diffusion and Consumption of Business Knowledge. London: Macmillan, pp. 278-304.
Nonaka, I. (1994): A dynamic theory of Organizational knowledge creation”, Organization Science, 5:1, 14-36.
O’Shea, James, and Charles Madigan (1997): Dangerous Company. The Consulting Powerhouses and the Businesses They Save and Ruin. London: Nicholas Brealey
Oakland, J. (1989). Total Quality Management. London: Heinemann.
OECD (1995). Best Practices for Small and Medium-Sized Enterprises. Paris.
OECD (ed.) 1996: Employment and growth in the knowledge–based economy. Paris.
OECD/Eurostat (eds.) 1997: The measurement of scientific and technological activities. Proposed guidelines for collecting and interpreting technological innovation data. Oslo Manual. Paris.
Orgogozo, I. (1985). ‘Des cercles de qualité dans l’Administration: pourquoi pas?’, Regards sur l’actualité, (116): December, pp.23-32.
Orgogozo, I. (1987). Les paradoxes de la qualité. Paris : Éditions d’organisation.
Orgogozo, I. and H. Sérieyx (1989). Changer la changement: on peut abolir les bureaucraties. Paris : Éditions du Seuil.
Palmer, D.A., Jennings, P.D. and Zhou, X. (1993): “Late adoption of the Multidivisional form by large U.S. corporations: Institutional, political, and economic accounts”. Administrative Science Quarterly. 38, 100-131.
Paquier, A. and B. Towhill (1991). ‘Municipal Accounts in France’, Public Finance and Accountancy, January, pp.12-13.
Pastor, J.C., Meindl, J. and R. Hunt (1998). ‘The Quality Virus: Inter-Organizational Contagion in the Adoption of TQM’, In Alvarez, J. L. (ed). The Diffusion and Consumption of Business Knowledge. London: Macmillan Press Ltd., pp.201-219.
Patel, P. and Pavitt, K. (1994): The nature and economic importance of national innovation systems. In: STI-Review No. 14, pp. 9-32.
Pedrocco, G., (1980), Fascismo e nuove tecnologie. L’organizzazione industriale da Giolitti a Mussolini, Bologna: CLUEB.
Penrose, Edith (1959). The Theory of the Growth of the Firm. Oxford : Blackwell.
Peters, T. and R. Waterman (1982). In Search of Excellence. New York: Harper and Row.
Pettigrew, A. (1985). The Awakening Giant. Continuity and Change in ICI. Oxford: Basil Blackwell.
Picot, A. and Boehme, M. (1995): Zum Stand der prozeßorientierten Unternehmensgestaltung in Deutschland. In: Nippa, M./Picot, A. (eds.): Prozeßmanagement und Reengineering: Die Praxis im deutschsprachigen Raum. Frankfurt, Main/New York, pp. 227–247.
- 205 -
Pike, J. and Barnes, R. (1996): TQM in Action: A Practical Approach to Continuous Performance Improvement. (second edition), London: Chapman & Hall.
Piore M. J. and Charles, F. Sabel, (1984), The second industrial divide possibilities for prosperity, New York: Basic Books.
Pleschak, F. and Sabisch, H. (1996): Innovationsmanagment. Stuttgart.
Pochard, M. (1995). ‘Current and Future Developments in Service Quality Initiatives: The Situation in France’, In OECD (ed). Responsive Government: Service Quality Initiatives. Paris: OECD, pp.49-57.
Polanyi, M. (1962): Personal Knowledge: Towards a Post-Critical Philosophy. New York: Harper Torchbooks.
Pollitt, C. (1990). Managerialism and the Public Services. Oxford: Basil Blackwell.
Pollitt, C. (1998). ‘Managerialism Revisited’, In B. G. Peters and D. S. Savoie (eds). Taking Stock: Assessing Public Sector Reforms. Montreal/Kingston: McGill-Queen’s University Press, pp.45-77.
Pollitt, C. and G. Bouckaert (eds). (1995). Quality Improvement in European Public Services. London: Sage.
Porter, M. E. 1991: Nationale Wettbewerbsvorteile: erfolgreich konkurrieren auf dem Weltmarkt. München.
Powell W. W. and DiMaggio P. J. (1991). The New Institutionalism in Organizational analysis. Chicago: The University of Chicago Press.
Powell, T.C. (1995): “Total quality management as competitive advantage: A review and empirical study”, Strategic Management Journal, 16, 15-37.
Priewe, J. 1997: Die technologische Wettbewerbsfähigkeit der deutschen Wirtschaft. Stärken, Schwächen, Innovationsdefizite. Berlin. In: Discussion paper FS II 97-203, Wissenschaftszentrum Berlin für Sozialforschung.
Räsänen (1987)
Reinhard, M. and Schmalholz, H. (1996): Technologietransfer in Deutschland: Stand und Reformbedarf. In: Schriftenreihe des ifo Instituts für Wirtschaftsforschung, No. 140. Berlin, München.
Richard, P. (1988). ‘Les finances locales de 1983 à 1987’, Revue française des finances publiques, Vol. 22.
Robertson, M., Swan, J. and Newell, S. (1996): The role of networks in the diffusion of technological innovation. Journal of Management Studies, 33, 333-359.
Roney, J. (1997): “Cultural implications of implementing TQM in Poland”, Journal of World Business, 32:2, 152-168.
Rønning, Asle (1997) ”Innføring av divisjonsstruktur i Norsk Hydro”, Cand. philol. thesis in history, University of Oslo
Rouban, L. (1989). ‘The Civil Service and the Policy of Administrative Modernization’, International Review of Administrative Sciences, (55), pp.445-465.
Røvik, K. A. (1996). ’Deinstitutionalisation and the Logic of Fashion’. In B. Czarniawska and G. Sevon (eds.), Translating Organizational Change. Berlin: De Gruyter
- 206 -
Røvik, K. A. (1998). Moderne organisasjoner. Trender i organisasjonstenkningen mot tusenårsskiftet. Bergen: Fagbokforlaget
Røvik, K. A. (1999). ’The Secrets of the Winners. Towards a Theory of Management Ideas that Flow.’ Paper presented to the 15th EGOS Colloquium, 4-6 July, The University of Warwick, UK
Russell, A. W. (1984). ‘The Financial Management Unit of the Cabinet Office and the Treasury’, Management in Government, (2), pp.146-152.
Sahlin-Andersson, K. (1996). ‘Imitating by Editing Success: The Construction of Organizational Fields’. In B. Czarniawska and G. Sevon (eds.), Translating Organizational Change. Berlin: De Gruyter
Saint-Martin (2000). ‘The Formation of the New Entrepreneurial State and the Growth of Modern Management Consultancy’, in D. Braun and A. Busch (eds). Public Policy and Political Ideas. Cheltenham, UK: Edward Elgar, pp.82-97.
Saint-Martin, D. 1998. ‘The New Managerialism and the Policy Influence of Consultants in Government’, Governance, (11): 3, pp.319-355.
Salvall, H. (1992). ‘Développement du professsionalisme des consultants’, In ISÉOR (ed). Qualité du conseil et mutation du secteur public. Paris : Economica.
Sapelli, G., (1975), Fascismo grande industria e sindacato. Il caso di Torino 1929/1935, Milano: Feltrinelli.
Sapelli, G., (1997), “Gli organizzatori della produzione”, in Annali della Storia d’Italia, Torino: Einaudi, pp. 592-696.
Sauviat, Catherine and Véronique Peyrache (with Odile Henry, Matthias Kipping, and Simone Strambach) (1994): L’identification et l’efficacité de la relation conseil/ entreprise: une comparaison France-Allemagne. Rapport final pour le Commissariat Général du Plan, IRES, November.
Sauviat, H. C. (1991). Conditions d’émergence et caractéristiques du développement d’un marché de l’expertise et du conseil en France. Paris : IRES, Working Document No.9101.
Schein, A. H. (1996): Culture: The Missing Concept in Organization Studies. Administrative Science Quarterly, 41, pp. 229-240.
Schein, E, H. (1988): Process Consultation. Volume I. Its Role in Organization Development, Reading, MA: Addison-Wesley.
Schein, E. (1999): Process Consultation Revisited: Building the Helping Relationship. Reading, MA: Addison-Wesley.
Schienstock, G. (1997): The transformation of regional governance: Institutional lock–ins and the development of lean production in Baden–Württemberg. In: Whitley, R./Kristensen, P. H. (eds.): Governance at work. The social regulation of economic relations. Paris, pp. 190–208.
Schmidt, V. (1991). Democratizing France: The Political and Administrative History of Decentralization. Cambridge, MA: Cambridge University Press.
Schmidt, V. (1996). From State to Market? The Transformation of French Business and Government. Cambridge, MA: Cambridge University Press.
Schumpeter, J.A. (1990): Fundamentals of Economic Development. Aldershot : Elgar.
- 207 -
Scott, B. R. (1973). ‘The Industrial State: Old Myths and New Realities.’ Harvard Business Review, March-April: 133-148.
Scott, W.R. and Meyer, J.W. (1994): Institutional Environments and Organizations. Thousand Oaks, CA: Sage.
Searle, G. R. (1971). The Quest for National Efficiency: A Study in British Politics and Political Thought, 1899-1914. Berkeley: University of California Press.
Selznick, P. (1949). TVA and the Grass Roots. Berkeley: University of California Press
Selznick, P. (1957). Leadership in Administration. New York: Harper & Row
Selznick, P. (1996). ‘Institutionalism ”Old” and ”New” ’. Administrative Science Quarterly, Vol.41: 270-277.
Shapiro, E.C., Eccles, R.G. and Soske, T.L. (1993): “Consulting-has the solution become part of the problem?”. Sloan Management Review, 34:4, Summer, 89-95.
Silva, A.S. (1997): “O sistema financeiro Português e o movimento de internacionalização de empresas”, Economia e Prospectiva, 1:2 (July/September), pp. 59-70.
Simões, V.C. (1995): “Innovation in Portuguese manufacturing industry”, in J. Molero (ed.): Technological innovation, multinational corporations and new international competitiveness: the case of intermediate countries, Harwood Academic Publishers.
Sluyterman, K., Dankers, J., van der Linden, J. and van Zanden, J. L. (1998). Het coöperatieve alternatief. Honderd jaar Rabobank 1898-1998. The Hague: Sdu Uitgevers.
Smith, T. and A. Young (1996). The Fixers: Crisis Management in British Politics. Aldershot: Dartmouth.
Snyder, W. M. (1997): “Communities of Practice: Combining Organization Learning and Strategy Insights to Create a Bridge to the 21st Century”. Organization Development and Change.
Soskice, D. (1996): German Technology Policy, Innovation, and National Institutional Frameworks. Discussion paper FS I 96–319 Wissenschaftszentrum Berlin für Sozialforschung. Berlin.
Steinmo, S., K. Thelen and F. Longstreth (eds). Structuring Politics: Historical Institutionalism in Comparative Perspective. Cambridge, MA: Cambridge University Press.
Stevens, J. M., Beyer J. M. and Trice H. M. (1978). ‘Assessing Personal, Role, and Organizational Predictors of Managerial Commitment’. Academy of Management Journal, Vol. 21: 380-396.
Stinchcombe, A. L. (1968). Constructing Social Theories. Chicago: University of Chicago Press
Strambach, S. (1997a): Wissensintensive unternehmensorientierte Dienstleistungen – ihre Bedeutung für die Innovations– und Wettbewerbsfähigkeit Deutschlands. In: Deutsches Institut für Wirtschaftsforschung (DIW) (ed.): Vierteljahreszeitschrift, Vol. 66, No. 2. Berlin, pp. 230–242.
Strambach, S. (1997b): Die Rolle wissensintensiver unternehmensorientierter Dienstleistungen im Strukturwandel der Region Stuttgart. In: Gaebe, W. (ed.): Struktur und Dynamik in der Region Stuttgart. Stuttgart, pp. 82-97
- 208 -
Strambach, S. (1998): Knowledge-intensive business services as an element of learning regions – the case of Baden-Württemberg. CD-ROM 38th Congress of the European Regional Science Association 28 August - 1 September 1998. Vienna.
Sturdy, A. (1997): “The dialectics of consultancy”, Critical Perspectives on Accounting, 8, 511-535.
Sturdy, A. (1999). ’Front-line Diffusion – the Production and Negotiation of Knowledge Through Training Interactions.’ Paper presented to the 15th EGOS Colloquium, 4-6 July, The University of Warwick, UK.
Sturdy, A. and Fleming, P. (2001). ‘Talk as technique – a critique of the words and deeds distinction in the diffusion of customer services cultures’, Paper presented at the 17th EGOS Colloquium, Lyon, 5-7 July.
Sturdy, Andrew (1997): The consultancy process – an insecure business. Journal of Management Studies, 34 (3), pp. 389-413.
Sull, Donald N., Tedlow, Richard S. and Rosenbloom, Richard S. (1997): “Managerial commitments and the technological change in the US tire industry”, Industrial and Corporate Change, 6:2, 461-500.
Szulanski, G. (1996): “Exploring internal stickness: impediments to the transfer of best practices within the firm”, Strategic Management Journal, 17 (Winter, special issue), 27-43.
Taylor, J. C., and D. F. Felten (1993): Performance by Design: Sociotechnical Systems in North America. Englewood Cliffs, Nj.: Prentice Hall.
Tenkasi, R. V., and R. J. Boland (1993): Locating Meaning Making in Organizational Learning: the narrative basis of cognition. Research in Organizational Change and Development, 7: 77-103.
Tidd, J., Bessant, J. and Pavitt, K. (1997): Managing Innovation. Integrating Technological, Market and Organizational Change. Chichester.
Tiratsoo, N. and J. Tomlinson (1993). Industrial Efficiency and State Intervention: Labour 1939-51. London: Routledge.
Tiratsoo, N. and J. Tomlinson (1998). The Conservatives and Industrial Efficiency, 1951-64. London: Routledge.
Tisdall, P. (1982): Agents of Change. The Development and Practice of Management Consultancy. London: Heinemann
Tordoir, P.P. (1995): The Professional Knowledge Economy: the Management and Integration of Professional Services in Business Organisation. Netherlands: Kluwer Academic Publishers.
Townley, Barbara (1989): Selection and appraisal: reconstituting ‘social relations’? In: John Storey (ed.), New Perspectives on Human Resource Management. London: Routledge
TQM International and UMIST (1995): Using Quality Tools and Techniques Successfully. Cheshire: TQM International.
Tushman, M. L. and Romanelli, E. (1985). ‘Organizational Evolution: A Metamorphosis Model of Convergence and Reorientation.’ In L. L. Cummings and B. M. Staw (eds.), Research in Organizational Behavior, Vol.7: 171-222
- 209 -
Veugelers, R. and Cassiman, B. (1999) : “Importance of international linkages for local know-how flows. Some econometric evidence from Belgium”. Paper presented at the CESSEFI Conference, Paris, May 1999.
Villari, L. (1992): Il Capitalismo Italiano del Novecento. Roma: Biblioteca Universale Laterza.
Walgenbach, Peter and Beck, Nikolaus (2000): “From statistical quality control, quality systems to TQM – the institutionalization of a new management approach”. Paper presented at EGOS Conference.
Warner, M., and Campbell, A. (1993): German Management. In: Hickson, D. (ed.): Management in Western Europe. Society, culture and organization in twelve nations. Berlin/New York, pp. 89–108.
Weber, H. and Seltz, R. (1994): Zwischen 'Over–engineering' und 'Lean Construction' – Zum Wandel von Organisation und Qualifikation von Ingenieuren. In: Weber, H. (ed.): Lean Management – Wege aus der Krise. Organisatorische und gesellschaftliche Strategien. Wiesbaden, pp. 157–187.
Website of the Institute for Applied Behavioral Sciences: www.ntl.org
Weick, Karl E. (1994): Organizational culture as a source of high reliability. New Thinking in Organizational Behaviour. Oxford, Butterworth Heinemann.
Weick, Karl E. (1995): Sensemaking in Organizations. Thousand Oaks: Sage.
Weir, M. (1992). Politics and Job. Princeton, NJ: Princeton University Press.
Westphal, J.D., Gulati, R. and Shortell, S.M. (1997): “Customization or conformity? An institutional and network perspective on the content and consequences of TQM adoption”. Administrative Science Quarterly. 42, June, 366-394.
Whitley, R. (ed.) (1992): European Business Systems: Firms and markets in their national contexts. London.
Whitley, R. and Kristensen, P. H. (eds.) 1997: Governance at work. The social regulation of economic relations. London.
Whittington R. and Mayer M. (2000) The European Corporation, Oxford: Oxford University Press
Wiele, Ton van der, Dale, Barrie and Williams, Roger (2000): “ISO 9000 Series and Excellence modles: Fad to Fashion to FIT”, Journal of General Management, 25:3, 50-66.
Wiersma, M. F. (1995). ’Excecutive Succession as an Antecedent to Corporate Restructuring’, Human Resource Management, Vol. 34, No.1: 185-202
Wiersma, M. F. and Bantel, K. A. (1993). ’Top Management Team Turnover as an Adaptation Mechanism: The Role of the Environment.’ Strategic Management Journal, Vol.14: 485-504
Willcocks, L. & Grint, K. (1997). ’Re-inventing the Organization? Towards a Critique of Business Process Reengineering.’ In McLoughlin, I. and M. Harris (eds.), Innovation, organizational change and technology. London: International Thompson Business Press.
Zahn, E. and Soehnle, K. (1996): Auswirkungen des Outsourcing von Dienstleistungen in der Region Stuttgart. Stuttgart.
- 210 -
Zamagni, V. (1990), Dalla periferia al centro, Bologna: Il Mulino.
Zbaracki, M.J. (1998): “The rhetoric and reality of total quality management”, Administrative Science Quarterly, 43, September, 602-636.
Zeitz, G., Mittal, V. and McAulay, B. (1999): “Distinguishing adoption and entrenchment of management practices: a framework for analysis”, Organization Studies, 20:5, 741-776.
Zucker, L.G. (1987): “Institutional theories of organization”, Annual Review of Sociology, 13, 443-464.
Zukin, Sharon and Paul DiMaggio, (1990): “Introduction.” In: Sharon Zukin, and Paul DiMaggio (eds.), Structures of Capital: The Social Organization of the Economy. Cambridge: Cambridge University Press, pp. 1-36.
Top Related