Advanced manufacturing technology: organizational design and strategic flexibility

Organization Studies, Summer, 1996 by David Lei, Michael A. Hitt, Joel D. Goldhar

Smooth cross-functional coordination is an organizational routine that possesses a certain tacit quality. Cross-functional coordination is tacit to the extent that it is distinctive and embedded in the organization's social fabric over time (Badaracco 1991). Itami (1987), Dosi (1988), Hayes et al. (1988), Nonaka (1991) and Dougherty (1992) describe the importance of cross-functional coordination to bridge R&D with manufacturing and marketing activities. Cross-functional integration among these functions is vital to facilitate the mutual adjustment needed for managing reciprocal flows of information (Thompson 1967). Organizational mechanisms that promote integration (especially between design and manufacturing) include multifunctional teams (e.g. Clark and Fujimoto 1991), the use of integrators (Dean and Snell 1991), product planning forums (Prahalad and Hamel 1990), hierarchy-based reward systems (Kerr and Slocum 1987) and managerial rotation and cross-training (e.g. Galbraith and Nathanson 1978).

In a broader sense, cross-functional coordination and integration requires a 'loosely coupled' organization design (Orton and Weick 1990). Loose coupling balances the need for strong interdependence among functions (e.g. design, manufacturing and marketing) with an open responsiveness to changes in the environment. Loose coupling facilitates the achievement of both distinctiveness and responsiveness (Orton and Weick 1990). Thus, organizational distinctiveness in the context of AMT results from the tacit knowledge base that becomes firm-specific over time; responsiveness refers to the potential economies of scope derived from the AMT and the organization's heightened flexibility. The cultivation of both qualities depends on the smoothness of cross-functional integration. This integration results in a combination of both organizational distinctiveness and responsiveness that helps firms achieve a careful (and idiosyncratic) balance of centralization and decentralization. Consequently, loosely coupled systems allow units to act independently but also to be responsive to the organization's overall needs [analogous to a strategic network (Miles and Snow 1986)]. High levels of cross-functional coordination to develop and share knowledge among the functions are important in building and exploiting economies of scope and fast-response capabilities.

Means of achieving loose coupling include shared values, subtle leadership and focused attention (Weick 1979; Orton and Weick 1990; Hitt et al. 1993). If managers within an organization share the same values, their actions will be subtly coordinated. Strong corporate cultures can work to promote shared values (Killman et al. 1986). In addition, subtle leadership provides a degree of centralized direction and coordination while preserving a large measure of sub-unit autonomy and discretion. Lastly, focused attention is concerned with target selection and taking action. This feature is particularly important to achieving economies of scope and fast response in the AMT environment, because the range of targets is likely to increase with growing product modularity and process flexibility. Focused attention on new ways to expand product design compatibility or modularity, CAD/CAM linkups with other designers and suppliers, as well as continuous improvement (Imai 1986) contribute to enhancing the loosely coupled firm's distinctiveness and responsiveness.