Expert Humans or Expert Organizations?

Organization Studies, Spring, 1999 by Frank Mueller, Romano Dyerson

Introduction

As Kay (1993) has pointed out, the exact reasons why some companies have been successful in managing technological innovation and change remain at least partially opaque, otherwise every company would have been as successful as 3M, Glaxo or Toyota. One reason for this opacity is that organizational and human resource aspects play a significant role in the successful management of technology and its implementation within the firm. The challenge to any modern organization is, as Drucker (1990) has observed, the 'integration of specialised knowledges into a common task' (p. 4). However, the flowering of expertise through teams and individuals presents a challenge to the organization because the development of expertise raises the marketability of the individual or group to external agencies, rendering the organization strategically vulnerable to the threat of exit. Typically, organizations influence the inputs (training, information) that employees receive in the hope of benefiting more or less directly from the outputs (skills and expertise). An organization that invests in expertise may, however, find that the returns from that investment may not be fully captured or easily appropriated. In this paper, we argue that management needs to be aware of a number of typical appropriation challenges and adopt suitable policies for addressing them.

A diverse, specialized knowledge base poses a challenge to management because as Williamson (1985) and others (Willman 1991; Kay and Willman 1991; Scarbrough 1993, 1995) have emphasized, problems of appropriation arise when exchange-specific investments are required by one of the contracting parties. In this paper, we explore aspects of appropriability that arise in the context of technological change, and within this, we focus on the active role that managers can play in enhancing and protecting the organization's knowledge base. Physically, if an organization purchases a computer system, then one can say that the organization effectively owns (has title to) the system. The organization per se can control the computer's location, its inputs (programmes and databases) and outputs (reports and actions). A similar level of control cannot be applied to the computer's human operators or those charged with its implementation. Since the organization (slavery excepted) does not enjoy complete property rights over employees, absolute control over inputs, outputs and location cannot be asserted. Employees, at the end of the day, have the option of walking away from the organization. External consultants present additional problems because here the organization may not understand or properly evaluate the inputs and outputs that it is receiving. Consultants, even more so than employees, have every incentive to utilize their knowledge strategically to build in dependency.

Contingency theory suggests that rising environmental complexity finds its correlation in increasing organizational complexity and differentiation (Galbraith 1973). Sources of environmental change include technological innovation, the move to large-scale computerization, for example, or institutional change such as deregulation or privatization. The organization will try and tackle problems in its 'relevant environment' by securing the services of intermediaries or experts such as computer consultants, engineers and lawyers (Scott 1981, 1990). However, as organizational processes have become increasingly complex and diverse, greater management attention has had to be directed at the informational interdependence between specialities, functions and projects (Lawrence and Lorsch 1967; Tushman and Nadler 1978; Tushman and Nadler 1986; Rockart and Short 1989). This has prompted many suggestions on how the lateral flow of knowledge within organizations might be enhanced (Liu et al. 1990). McKersie and Walton (1991: 248-249) referred to the need for 'alignment' between technological requirements and organizational capabilities, because the former can only be fully realized through the latter. Pasmore (1994) suggested that organizations should be 'fractal' in design: such organizations should be viewed not so much as a series of functions and departments but rather as an inventory of talents and skills. Within fractal organizations, temporary concentrations of expertise can be created (ibid.: 225-226). In these organizations, the managers' role is increasingly one of co-ordinating different sources of expertise with open access to shared information (Webb and Cleary 1994: 30; cf. Grandori 1996) Arguably, however, the diffusion of fractal-type organizations is being slowed down because questions of appropriability are being neglected: for example, how can experts who are encouraged to engage in free information sharing with their colleagues in temporary project teams be at all sure that employing their knowledge in this way will not have any negative effect on furthering their own career? What if this sharing takes place in an overall context of organizational restructuring and downsizing? Whilst it might be true that the organizational role of integrating teams is to enable participants 'to emphasise knowledge in particular areas while keeping abreast of developments in related areas' (Appelbaum and Batt 1994: 103) surely an important question is whether this is in the participants' own interest (Townley 1994).