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Flexibility Audit

Functional Chaos or Flexible Truth?

P.R. Boers (Erasmus)Drs. N.A. Giling (AMS/QB) G. Joppe (Erasmus)Ing. J.J. Kooiman (AMS/QB)Dr. H.W. Volberda (Erasmus)

Department of Strategic Management &Business EnvironmentRotterdam School of ManagementErasmus UniversityAugustus 31, 1995

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Agenda

Flexibility audit KLM CARGO Environmental turbulence profile Flexibility profile Actual organizational potential Discussion and conclusions

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Conceptual model

Environ-ment

Flexibility Mix

Technology Structure Culture

Stable/Turbulent

• Operational• Structural• Strategic

Low/highpotential

Organizationdesign task

Management task

Organizational conditions

} Limited/broad

Metaflexibility

C

Environmental Turbulence Profile

Regulations

P-M combinations

Customer/clients

Financial resources

Outer technologies

Labor markets

Workload

Suppliers

27%

42%

41%

35%

45%

29%

42%

62%

0% 25% 50% 75% 100%

Regulations

P-M combinations

Customer/clients

Financial resources

Outer technologies

Labor markets

Workload

Suppliers

Turbulence

Unpredictability

Dynamism

Complexity

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Environmental Turbulence Profile (2)

Summary– Turbulence

Complex, dynamic environment Highly controllable

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Environmental Turbulence Profile (3)

Complexity– Suppliers

Increase of internal dependencies

Technology– Increase of new technologies for process control

PMC’s– Grey area’s (who owns the customer?)

Customers– Increasing number of client demands due to intended shift to direct

accounts

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Environmental Turbulence Profile (4)

Dynamism– Workload

“Making your capabilities visible”

– Technology Many developments in technology, impact on organisation

– Financial Resources Variations in allocation of financial resources “Financial resources are not limiting Cargo’s actions at the

moment”

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Environmental Turbulence Profile(5)

Unpredictability– Inside-out:

Predictable markets, despite lack of market information

– Suppliers Internally highly dependent, yet relations seem

unclear

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Flexibilityscan KLM Cargo

Information activities

P roduct-marketcombinations

Externalcustomers/clients

Internalcustomers/clients

Financial resources

P ersonnel

P roducts/services

Information system

P roduction system

Outer technologies

Labor market

Workload

Suppliers

61%

65%

59%

42%

55%

49%

60%

51%

52%

55%

51%

55%

59%

0% 25% 50% 75% 100%

Information activities

P roduct-marketcombinations

Externalcustomers/clients

Internalcustomers/clients

Financial resources

P ersonnel

P roducts/services

Information system

P roduction system

Outer technologies

Labor market

Workload

Suppliers

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Flexibilityscan KLM Cargo (2) High overall flexibility Highlights:

– High flexibility score regarding suppliers of capacity (rubber planes)

– High flexibility score regarding PMCs (anticipating market needs)

– Less internal flexibility, focus on cost and efficiency

– Less flexibility regarding internal clients (compared to external clients)

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Technology characteristic

Routine Non-routine

Mode of production

process mass large batch small batch unitPhysical layout

line group functional stationMeans of transformation

specialised multi-purpose universalOperational prod. repertoire

limited extensive

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Technology characteristic (2) Summary

– Large deviation: much variety in flexibility potential of technology within division

– Flexibility potential can be inproved by increasing the applicability of infosystems and widening the operational production repertoire

– Design variables lay out & mode of production are hardly changeable

– > The above determines the potential for operational flex. of the current organisation

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Technology characteristic (3)

Mode of production– batch leaning towards mass production– Large range of services (mass customised)

Lay-out– functional-group– much dependences between operations

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Technology characteristic (4)

Means of transformation– Average flexibility, not applicable for other

services– Info systems support functional departments

instead of processes Operational production repertoire

– Quality control based on informal spot-checks and self-control

– Routinization of actions, little customization

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Structure characteristic Mechanistic Organic

Organisational form

functional division matrixGrouping

Organisational form function service target marketHierarchical levels

many fewFunctionalisation

many low

Planning systems Control systems

many few

Specialisation:

many low~ scope of task

narrow broad~ depth of task

easy complex~ interchangeability

low highStandaardisation

high lowProcess regulations Training & education

low highFormalisation

high lowLiaison devices

many fewHorizontal decentr.

low highDelegation

low highParticipation

low high

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Structure characteristic (2)

Summary– Flexibility potential restricted by functional

organisation, control systems and large dependencies between subparts

Organisational form– Functional– Specialised to function & product– Integral management

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Structure characteristic (3)

Control systems– Top down & bottom up planning

Process regulation– Specialisation systematically, but not

formalised– Much participation, yet limited autonomy of the

departments– Large sequential dependencies in processes

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Culture Characteristic Conservative Innovative

Communality

strong weakIdentity formation Scope

narrow broadHomogeneity

homogeneous heterogeneous

Leadership style

instructive consultive participative delegativeLeadership Planning approach

bleu print incrementalManagement attitude

routine heuristic improvisation

Disipline dominance

strong weakSocialisation

Unwritten rules strong weakAttitude formal-actual

unequivocal equivocalTolerance for ambiguity

low high

Focus

short term long termExternal orientation Openness

closed openPlanning attitude

reactive inactive proactive interactive

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Culture Characteristic (2) Identity

– Strong collective “pride” “everything is possible here”

– Many sub-cultures Leadership

– Consultive leadership style of division management– Lack of leadership by lower management– Freedom within guide-lines– Priority rules

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Culture Characteristic (3)

Unwritten rules– Strong conformation to Cargo mentality– Discipline dominance: “work hard, don’t argue”– Rules are violated by definition (everybody is

vice president)– Willingness to change (except for middle

management) – “Practise what you preach”

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Culture Characteristic (4)

External orientation:– long term– Fairly open, yet renewal is mainly means

orientated and technology-driven– Anticipation of changes is purely driven by

self-interest

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Decision support matrix(flexibility deficit)

Actual flexibility

Su

pp

liers

Wo

rklo

ad

La

bo

r ma

rkets

Ou

ter techn

olo

gies

Pro

du

ction

system

s

Info

. system

Pro

du

cts/services

Perso

nn

el

Fin

. resou

rces

Intern

al clien

ts

Ex

terna

l clients

P-M

com

bin

aties

Info

. activ

ities

Environmental turbulence

SuppliersWorkloadLabor marketsTechnology (know how )Financial resourcesCustomers/ clientsP-M combinationsRegulations

C

Decision support matrix(flexibility surplus)

Actual flexibility

Su

pp

liers

Wo

rklo

ad

La

bo

r ma

rkets

Ou

ter techn

olo

gies

Pro

du

ction

system

s

Info

. system

Pro

du

cts/services

Perso

nn

el

Fin

. resou

rces

Intern

al clien

ts

Ex

terna

l clients

P-M

com

bin

aties

Info

. activ

ities

Environmental turbulence

SuppliersWorkloadLabor marketsTechnology (know how )Financial resourcesCustomers/ clientsP-M combinationsRegulations

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Overall analysis

Operationalflexibility

Structuralflexibility

Strategicalflexibility

Co

ntr

olla

bili

ty

High

Low

Rigidorganisation

Bureaucraticorganisation

Flexibleorganisation

Chaoticorganisation

kc ?

Flexibility mix