The ECCO System

Cybernetic Principles for Effective Control in Complex Organizations 

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Chapter I

Introduction and Overview

Introduction

This work seeks to outline a new framework for the management of complex modern organizations. The notion of complexity, as used here, is that of multiple interdependencies, which create the requirement of close co-operation and coordination among employees, departments, management and labor, and various other elements within an organization. There is a clear sense in the management literature that the traditional organizational approaches are not working, or at least could be improved. The attempt to create modern management techniques adequate to the job has recently come under the rubric of "Total Quality Management" though many management fads, theories, and methods, with similar ends, have emerged over the past fifty years. Few of these attempts have explicitly framed the problem to be solved as the problem of maintaining control in complex organizations.

The field of cybernetics, founded in the 1940s, is specifically concerned with goal achievement in complex dynamic systems. The formalisms and empirical investigations in the field of cybernetics have tremendous potential in shedding theoretical light on the messy and complicated real-world problems of management of complex organizations. However the relationship between the highly abstract and formal approach of cybernetics and the pragmatic, applied problems in business and industry is far from intuitive. This work is intended to make the application clearer.

The "Total Quality" approach was originally associated with W. Edwards Deming and Joseph Juran and their work with Japanese manufacturers, but has now been widely adopted and modified by a variety of organizations and quality consultants. The term "Total Quality" has never been adequately defined, but is widely associated with excellence in product design and reliability at low cost, in improved customer satisfaction, dramatic reductions in all kinds of waste, virtual elimination of errors in both production and support service activities, and resultant increases in profits and market share. Many practices are associated with the "Total Quality" movement including Statistical Process Control; various forms of lean production practices; standing work groups with varying degrees of self-direction and autonomy; interdisciplinary team efforts in both design and problem-solving which are undertaken by employees doing the work; and co-operative involvement with suppliers.

In addition to the above-named elements, a number of additional and alternative practices, technologies and techniques have been developed and utilized in the United States in pursuit of the same goals as the "Total Quality" model: excellence in manufacturing. These include advanced manufacturing technologies, robotics, concurrent engineering, and the integration of information systems technologies into both manufacturing and management areas.

As demonstrated in the literature review in Chapter II, it has been shown that efforts to improve quality, and efforts to achieve "Total Quality" results in many organizations have been fraught with unanticipated problems: the techniques associated with improvements in quality and productivity are not, in and of themselves, sufficient to produce "Total Quality" results. Both Japanese and American companies have produced some striking examples of successful "Total Quality" organizations. Although there are philosophies of success, examples of success, management practices associated with success, there is not yet an explicit theory underlying their success. This work seeks to provide the foundations and underlying principles of such a theory.

Thesis

Initially, it will be shown that the current framework for management common in the United States, the so-called Weber/Taylor bureaucracy, is not only inadequate for operation of a modern, "Total Quality" organization, but that it has trappings which are systematically hostile to many effective quality efforts.

It will be argued specifically that the changes required to obtain Total Quality results, and to make effective the associated techniques, practices and advanced manufacturing technology, are all based on certain cybernetic principles for the control of complex systems. The set of principles will be referred to as ECCO system principles: principles for the Effective Control of Complex Organizations. The phenomenon of "control" in such systems is a combination of regulation and co-ordination. The role of a "controller" function is therefore twofold: Not only must it set the parameters of the target function to be regulated, it must also architect the interactions among system elements so that they system will tend to behave as desired, moving in a co-ordinated way toward the identified goal. The majority of management attention, and the bulk of TQM activities, often focus on the regulatory aspect of control, ignoring the critical role of co-ordination.

After the cybernetic foundations for the principles have been established, they will be reframed to fit the applied manufacturing organization context. A total of nine ECCO system principles will be identified as critical to successful Total Quality efforts. The first four are necessary to the regulatory activities of the organization; the last five principles are seen as critical to management and co-ordination efforts.

Finally, a number of associated practices meeting specific criteria will be identified and described, which will serve as evidence that these principles are at work in the applied manufacturing setting. The field research will show that these practices are in fact present in three independently recognized quality organizations, identified by Baldrige award criteria.

Overview and Organization

The presentation of material begins with the second chapter, which examines the literature in the area of Total Quality Management and other approaches, both technological and managerial, whose intent is improvement of manufacturing performance. This includes consideration of the Japanese successes and their sources and the attempts of American firms to adopt various aspects of the Japanese techniques and management methods. It also includes consideration of various techniques, technologies, and management methods developed by American industry to improve performance. None of these methods or approaches alone has been sufficient for the task. Virtually all require a substantial change in organizational structure and culture to reap the associated benefits. Although much of the management literature proposes cultural change, and a few authors have suggestions for how the change is to come about, there is a lack of formal theory to support and explicate both how to create the new culture, and what structural changes should accompany it.

Specifically indicted by management specialists and other observers has been the so-called Weber/Taylor management structure dominant in most of US industry. In Chapter III, the characteristics of the Weber/Taylor structure are presented, and some of the reasons for its inhibiting effect on industrial performance are explored. The major impediments in the Weber/Taylor system are precisely those aspects which made it valuable in earlier, simpler times: It manages problems of moderate complexity by dividing the problem into subsystems, and coordinating it via a vertical hierarchy which controls communications, as well as the allocation of resources. The unfortunate side effects of this structure include the development of competition among subsystems, and incentives to optimize subsystem performance at the expense of system performance. Complicating matters, the way in which a bureaucracy attempts to control lower levels of operations is by dictating standard processes which are assumed (rather than proven) to achieve the desired outcome. It will be demonstrated that these attributes are in opposition to the requirements of coordination and cooperation necessary in complex organizations. Clearly, then, structure is important: The question of what structure should replace the Weber/Taylor bureaucracy has yet to be answered.

The proposed structure will be referred to as an ECCO System, for the Effective Control of Complex Organizations. This structure, or at least its theoretical guiding principles, ought to be found in the field of cybernetics, which is the study of complex, dynamic systems. The fourth chapter is a brief overview of essential cybernetic concepts to provide the language and insights which form the basis of the ECCO system's theoretical framework. It is this framework which is claimed to be essential for the achievement of "Total Quality" results, i.e. the successful coordination of complex, goal-oriented organizations. These principles are summarized in their abstract versions at the end of the chapter.

Chapter V translates these abstract principles into a set of specific principles applicable to the modern manufacturing environment, and specifies what practices in industry would count as evidence for the operation of these principles. Nine ECCO system principles are identified as critical to successful Total Quality efforts. The first four are necessary to the regulatory activities of the organization, including: the closing and shortening of all feedback loops; maximization of the capacity of all first-line regulators; planning and problem-solving to be performed by a heterarchy of first-line regulators who, in effect, model the process under consideration; and the analysis and correction of process, not just inputs. These principles help account for most of the employee training and involvement in day to day operations which is considered a critical part of Total Quality efforts. The principles have significant implications for what training ought to be provided, how teams ought to be configured and operated, and what criteria should be applied to evaluating successful team operations.

The next five principles are seen as critical to management and co-ordination efforts of the organization, including: the intrinsic alignment of incentives, evaluation systems, and reward structures for employees; of measurement systems; of company goals and all subsystem goals; of communications systems via common language and shared evaluation protocols; and finally, of oversight inspections or reviews which ensure that common meta-structure and meta-processes are being used and that goals are being achieved. These principles have significant implications for what constitutes adequate management "leadership", as well as the nature of adequate deployment of goals and objectives throughout the organization. The research method and conditions are also described.

Chapter VI is devoted to describing the research findings in the three companies selected: Motorola Corporation, IBM-Rochester, and Xerox Corporation. The reports are divided into descriptions of the companies, including short histories, product descriptions and workforce characteristics, followed by presentation of evidence of each of the principles identified in the previous chapter.

Chapter VII presents the overall conclusions and a revised set of principles which seem to successfully control the operations of highly complex modern manufacturing organizations. It discusses the potency of these principles to provide not only an accounting of why traditional management structures are insufficient for modern challenges, but also a description of the skeleton for a new paradigm of integrated control and why it works. The role and limitations of this approach are also discussed, since it purports only to develop a particular map for some inadequately explored territory, rather than to provide a complete approach to organizational change. It is hoped that the particular map it does provide will enable some organizations to achieve their Total Quality goals more effectively, efficiently, and painlessly than would otherwise be the case.

 


 

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© Kevin B Kreitman, 1992