Empirical test of a conceptual model to find relevant PPC

procedures to strategic entrepreneurship

J.M. Vilas-Boas da Silva, Management Department, ISCTE Business School

ISCTE – Lisbon University Institute

Av das Forças Armadas, 1649-026 Lisboa, Portugal
Tel +351-217.903.403 Fax +351-217.900.904
Email: jmvbs@iscte.pt

I gratefully acknowledge to Mr. José Paulo Filipe, the Industrial Sponsor of this research. I am also indebted to
Professors John M. Kay (Cranfield University), S.J. Formosinho Sanches Simões (Universidade de Coimbra),
António Morão Dias (Universidade de Coimbra) and Victor Sequeira Roldão (ISCTE – IUL) for their roles in
different stages of my academic career.

Abstract
This paper addressed the structural change of a SME, focusing on finding relevant Production
Planning and Control (PPC) procedures to the case situation. Thus, the utilisation of a
previously developed audit tool was reported as a credible way to discuss change alternatives
within the strategic scope of the organisational development of the firm. Moreover, despite
the credibility of the audit tool had already been established by its theoretical validation
according to the Soft Systems Methodology (SSM), there still was a requirement for checking
its usefulness. This was the target of the empirical test that will now be presented.
The main contribution to the literature was the divulgation of a credible diagnostic tool for
developing understanding about the relevance of the PPC procedures within the scope of the
Case Study Company (ICSC) under the soft systems guidance. In fact, the usefulness of the
developed conceptual model that was reported, confirmed the interest of a rival approach to
auditing that is made up of a substantially different nature from the one used by consultants.
This empirical test followed the stage 5 of SSM concerning the comparison between the
model and the perceived reality from the case. Thus, the previously developed conceptual
model – made up of a framework and three propositions – provided a systematic base for
ordered questioning. This was achieved by supplying the questions to ask concerning the
existing situation, as a source of debate about potential change. The exercise provided room
for a dialectical discussion from which changes to the perceptions of the problem situation
came out. This was the path to identify relevant PPC procedures to the specific situation of
the ICSC and to check the interest of the conceptual model as a useful process of enquiry.
The determinants of the organisational structure of TIM Lda (the ICSC) were analysed
taking into consideration the recommendations concerning the conceptual positioning of PPC
and the organisational structure effectiveness, i.e. both its congruence and conceptual
consistency. As a consequence, a top-down analysis attempted to show the impact of the
current state of the TIM determinants on the relevant parameters of the definition of its
manufacturing system, viz. on PPC. As further work, it was recommended that the approach
should be reversed, i.e. a bottom-up analysis based on the design parameters of the
manufacturing system should cross-check the previous top-down findings.
Finally, two different types of structures were found adequate to fulfill the needs of the
two clusters of SBUs, first put together according to the diversity, complexity, stability and
hostility of the market. These clusters were also confirmed by the type of technical system,
by the age & size of firm, by the use of AMTs and by the longitudinal progress of the work-
coordinating mechanisms across time. Moreover, the currently used technology was also
found easily divisible. In addition, relevant external pressure to implement formal
performance assessment schemes was anticipated. These assessment frameworks were found
to be set on the top of formal systems such as PPC and Quality Control. Furthermore, any
implementation effort targeting these control procedures was found to require the operational
support of IT and the development of a strategically favourable environment to IS progress.
To sum up, most of the learning and discussion with regard to the reviewing of the ICSC
structure would have been lost, if only rival PPC best practice approaches had been followed,
under a reductionist approach. So, the pursuing of a situational, holistic and structured
validated approach in order to help a small organisation to follow a strong entrepreneurial
strategy seemed useful and significant.
Keywords: empirical test, soft systems methodology, PPC procedures, strategic change,
organizational development, strategic entrepreneurship

2
Introduction
This paper describes the application of a conceptual model previously developed and
validated. Thus, it aims to test the usefulness of the model as a diagnostic tool for developing
understanding about the relevance of the Production Planning and Control (PPC) procedures
that could be used in the Industrial Case Study Company (ICSC) under a Soft Systems (SSM)
approach. In fact, it is expected that the case study will provide significant feedback in order
to dialectically discuss the ‘predictive’ abilities of the conceptual model, despite neither
causality is possible, nor quantitative studies make sense, within the chosen context. The
small enterprise that was chosen to run the case study represents a real life situation within
the precision engineering sector. Moreover, the conceptual model that will generate the audit
tool is made up of both a conceptual framework and three research propositions.

Conceptual framework
A previously proposed descriptive framework for positioning PPC (Silva, 2002: 4) took into
consideration key findings demanding business analysis to recognise that business strategy,
organisational structure and operational systems are inextricably linked.
The utilised conceptual framework (vide Figure 1) was the result of subjecting that
descriptive model to a cross-check development enabled by an in depth literature review. The
process followed a hypothetical-deductive approach aiming at establishing the conceptual
framework ahead of the
External environment Business
•complexity strategy fieldwork.
•stability Strategy This framework started by
•market diversity
•hostility Emergent
including eight propositions
strategy about the performance of
Decision PPC
making
Intended
relevance Production Planning and
strategy Control Systems (PPCS),
Internal characteristics
•age and size which stressed a few factors of
•technology
Structure dependence coming out of the
•power and culture Organisational
•past patterns
literature review (Silva, 2002:
theory
137). These eight previous
Source: Silva (2002 : 202).
propositions were summarised
into three new ones (vide next
Figure 1 – Conceptual framework to discuss PPC subsection) and they also went
relevance through a semantics adjustment
driven by the Soft Systems Methodology (vide Vilas-Boas, 2009b), after the theoretical
validation process has taken place.

Research propositions
The identification of PPC procedures that are relevant is addressed within the scope of the
approach that was previously theoretically validated as reported by Vilas-Boas (2009a). Thus,
the following propositions were found significant (Silva, 2002: 236):

First proposition about the relevance of PPC procedures

‘Both the knowledge areas of organizational structuring and strategic
management allow relevant contributions to the conceptual positioning of
PPC within the organizational scope.’

3
Second proposition about the relevance of PPC procedures
‘Relevant PPC procedures conceptually depend on the achievement of
structural effectiveness.’
In addition, the structural effectiveness for a manufacturing organisation was defined by
the following dimensions:
- Structural congruence, i.e. a close fit between the contingency factors and the design
parameters of the manufacturing system;
- Effectiveness of both Manufacturing and IS/IT strategies, i.e. conceptual consistency
between (i) the manufacturing strategy and the overall business strategy; (ii) the IS/IT
strategy and the overall business strategy; (iii) the manufacturing strategy and the
other functional strategies within the business; (iv) the functional strategies, in
particular, manufacturing and IS/IT strategies and the business environment; (v) PPC
and all the remaining design parameters with regard to design.
It should be highlighted that the contingency factors were previously defined as the
external environment, age and size, technology, power and culture, past patterns and strategy.
In addition, the design parameters of the manufacturing system were also reviewed and
summarised after a cross-check between the design parameters proposed by the
Organizational Theory and the strategic decision areas (vide Silva, 2002: 235).
In addition, the detail of the strategist view in the validation exercise previously carried
out has led to the extension of the second proposition in order to include the above mentioned
issues (i), (ii), (iii) and (iv) concerning strategic effectiveness. Moreover, a third proposition
arose from the discussion of the consistency between PPC and all the remaining design
parameters with regard to implementation and operation.
Thus, a third theoretically validated proposition should contribute to the expected
consistency in the performance of the control procedures and so, to the relevant choices of the
PPC procedures, as follows:

Third proposition about the relevance of PPC procedures

‘Relevant PPC procedures depend on the achievement of consistency between PPC and
all the remaining design parameters of the manufacturing system with regard to their
implementation and operation.’
In fact, the identification of the relevant PPC procedures is a holistic exercise, clearly
dependent on all the design parameters, which should not be taken into consideration under a
reductionist approach. Moreover, this dependence also includes the implementation and
operation of all the design parameters, in addition to their conceptual design ((v) of the
second proposition).

Audit tool
The outcome from the analysis, discussion and validation of the conceptual framework were
a set a ‘issues’ that led the development of the enquiring questions of the audit tool. Indeed,
this ‘list’ of ‘issues’ is reformulated to become a diagnostic tool for identifying relevant PPC
procedures within a specific set-up according to the approach explained in the methodology
section of this paper.
In Appendix 1 there is an extract of the topics that are covered in the interview with the
Managing Director of the Industrial Case Study Company. These illustrate the Interview
Guide, which is built up ahead of the fieldwork, in order to collect primary data through
semi-structured interviews. The resulting findings and their related discussion are going to be
presented in the remaining sections of this paper, just after the methodology section. Finally,
the last section of the paper concerns the conclusions.

4
Research Methodology

Setting the broad methodological guidelines

The research design follows the Soft Systems Methodology (SSM).
SSM is a systems-thinking-based approach to ‘messy’ real-world problem situations
dominated by different attributions of meaning. It provides structured guidelines for
examining the social context of any scientific intervention in real-world affairs. SSM is an
action-oriented methodology which purpose is to facilitate taking action in the world, in order
to bring about change (Checkland, 1994).
SSM generates an emergent, negotiable and adaptive design that takes into consideration a
multiple reality manifold by promoting a method of enquiry that adapts to changes in
problem situation, despite focusing on the definition of relevant systems through a negotiated
agreement of real world perceptions coming from debate and learning that is positioned
within the relevant social and political context (Vilas-Boas, 2009b).
The main attributes of the soft systems enquiring are closely related to the learning view,
as follows (Jackson, 1982): (i) analyst should accept different evaluations of the social
reality; (ii) subjectivist, not functionalist view; (iii) social problems do not adequate to
technical solutions; (iv) room for argument and debate; (iv) social systems should serve their
stakeholders; (v) systemic assumptions should be confronted with plausible counter-
assumptions; (vi) clients and decision makers could reach an ‘objective’ agreement
concerning the systems goals by consensus; (vii) purpose should be developed in human
society; and, (viii) social world might not be generated in the full awareness of the creator.
On the other hand, a qualitative case study strategy will be followed to approach the
industrial sponsor case, because it is context sensitive and holistic, it enables flexibility on
boundary definition, it enables an in-depth
and detailed study, it gets close to both
people and situations, it enables cross-
checking between opinions and results and,
it copes with more variables than data points
(e.g. Patton, 1987 and Yin, 1994).
Moreover, an abductive approach to case
research (Dubois and Gadde, 2002) was
followed when the audit tool to discuss
structure adequateness was developed.

The Soft Systems process

SSM is made up of seven stages (vide
Figure 2). Stages 1 and 2 are about
perceiving the situation. The nature of the
Source: Checkland (1994:163). problem situation shows a situation both
Figure 2 – Seven stages of SSM complex and dynamic. These situations,
falling within the quadrant IV of the matrix
of Malouin and Landry (1983), require a heuristic type of design. This is opposed to the
predominantly algorithmic nature of a causal relationship that, if applied to this enquiry,
could generate an effectiveness problem. In fact, the chosen process of problem-
structuring had turned the initially presented conditions and requests into a set of issues
for detailed research, preliminarily to data collection (Pidd, 1988).
Stage 3 of SSM concerns the root definitions of relevant systems, which are the concise
statement of ‘what’ is a system that seems relevant to the problem situation is known as a

5
root definition (RD) (Davies and Ledington, 1988). However, systems models are models of
relevant systems rather than an accurate representation of real systems (Woodburn, 1988).
Moreover, the relevant systems whose boundaries cut across the organisation and, even
provide conflicting views of the situation were deliberately chosen by the researcher
(Jenkins, 1983). In fact, the selected RD determined the perspective under which the
situation was examined (Malouin and Landry, 1983) preventing the problem-solver from
taking only one view (Gomez, 1982).
The relevant systems that the Descriptive Framework (vide Silva, 2002: 170) points out
are as follows: (i) the PPCS themselves, i.e. the PC structure and tasks; (ii) the logistics
systems, i.e. the PPCS implementations; (iii) the operation systems structure, i.e. the
organisation theories relating to the organisational structuring and the manufacturing systems
typologies and, (iv) the strategic systems, i.e. the procedures that provide and manage the link
and the transactions between the organisation and its environment, under a contingent
approach. With regard to the business strategic areas, operations strategy and IS/IT strategy
showed up as relevant issues.
Stage 4 of SSM concerns developing and testing the conceptual models. Indeed, the chosen
root definitions supported the development of a conceptual model of PPC that is expected: (i)
to enable greater understanding of the complex
situation of the ICSC to emerge; and also (ii)
to allow change to be identified (Woodburn,
1988). On the other hand, the development of
the conceptual model created the conditions to
design a credible audit tool to operationalise a
structured debate about change (vide Figure
3), as regards PPC systems, within the scope
of the precision engineering company, the
ICSC. In fact, in SSM, the system is not part
of the real world but it is the organised process
of enquiry (Checkland, 1988) developed in a
deductively way (Malouin and Landry, 1983).
During the process of development of the
Source: Checkland & Holwell, (1998: 14)
conceptual model, the propositions previously
set were subject to a theoretical validation. As
Figure 3 – SSM´s learning cycle a result, a set of issues leading to the
development of enquiring questions within the scope of the descriptive framework (DF) was
found. Indeed, these were the questions used in the questionnaires to orientate the fieldwork.
On the other hand, the validation of the conceptual model does not need to concern an
accept/reject decision making but, instead, it should identify models that are more defensible
than others (Checkland, 1994: 173). The theoretical validation of the audit conceptual model
followed SSM recommendations taking place in two stages – 4a and 4b (detailed in Vilas-
Boas, 2009a). In ‘stage 4a’ of SSM a grand theory was used to check that the audit model
was not fundamentally deficient with regard to inconsistency, inadequacies, inclusion of the
critical components to the problem, completeness and, usefulness. In ‘stage 4b’ the audit
model was examined for validity in terms of other systems thinking provided by findings of
published research from important authors.
Stage 5 of SSM concerns the comparison between the model and the perceived reality
from the case study. This exercise will provide room for a dialectical discussion (vide
section ahead) from which changes to the perceptions of the problem situation should
come out and so, new ideas for relevant systems. The use of the conceptual model as a
source of debate about potential change supplying the questions to ask concerning the

6
existing situation – i.e. Checkland’s first alternative – is reported in this paper. Thus, the
conceptual model provided a base for ordered questioning through the enquiring
questions. This is the procedure followed in order to identify the relevant PPC procedures
to the specific situation of the ICSC and to check the interest of the conceptual model as
a process of enquiry.
Stage 6 of SSM addresses feasibility and desirability of change. Thus, from those identified
as systemically desirable changes, some may be culturally feasible, others not (Checkland,
1988a). Therefore, the debate caused by human involvement and, by the social and
political aspects may constrain the potential changes and it may generate the need for
another methodological iteration (Checkland, 1994: 182). Nevertheless, the final decision
making belongs to the organisation and not to the system analyst (Jenkins, 1983).
Finally, stage 7 of SSM concerns action to improve the problem situation which is out of
the scope of the reported research.

Data collection activities

During the qualitative data gathering the researcher looked for the richness of people’s
experiences in their own terms. The aim was to attempt to picture the real-world as it existed
for those being surveyed, rather than picturing the researcher’s view (Patton, 1987:10, 20).
The pursued enquiry was naturalistic since it did not take place into a controlled
environment. Therefore, it avoided the manipulation of the participants (Patton, 1987:13).
The main methods of data collection that were used are as follows: (i) in-depth, open-ended,
conversational and semi-structured interviews; (ii) observation; (iii) careful description of the
observed situations, events, people, interactions and behaviours; and, (iv) analysis of reports,
written documents, archival records and computer packages.
In TIM, the Industrial Case Study Company (ICSC), the occupants of the following
management positions were interviewed: managing director (JP), operations manager (AL),
quality manager (MS), chief designer (AAA), human resource manager (HF), special tools
sales manager (AA), two section foremen (AT, AMR), warehouse manager (T) and
production controller (LD). Moreover, 20 hours were spent in both direct and participant
observation. These included the direct observation of the company and of its working
procedures by the researcher. The visual impressions that were collected served as a
complement to the interviewees statements, helping to position the interviews into the actual
context of the company. Other data were collected from the following ICSC reports: (i) MSc
thesis report (Silva, 1990); (ii) internal report of strategic analysis (Vilas-Boas, 2000); (iii)
company leaflets of 1993 and of 1998; (iv) internal report of cost analysis; and, (v) quality
manual (TIM, 2001) required for the official quality certification process of the company. In
addition, the follow-up of the ICSC across a time horizon of more than 10 years allowed
overcoming a popular criticism concerning the concentration of the academic investigations
on a short period.
With regard to the reporting activity, this research followed the tradition of qualitative
case studies going directly from the written-up notes to the case study report. Moreover, the
paper was structured in a narrative text that roughly followed the issues detailed in the
Interview Guide.

Interviewing process
The ‘issues leading the enquiring questions’ coming out of the previous theoretical validation
exercise (vide Vilas-Boas, 2009a) oriented the field work and the analysis that were carried
out, by providing the basis for the design of the interview guide.

7
 The interview guide was made up of a list of issues and questions to be explored in the
course of the interviews. The issues and questions included in the interview guides for
different functions – e.g. the Managing Director (MD), the Operations Manager or the
Section Foremen (Silva, 2002: 468) – took into consideration the function of the interviewee,
its hierarchical level, the situation surrounding its formal positioning in the organisational
chart and so, a weighted balance between the several types of management concerns, i.e.
strategic, tactical and operational.
For instance, the interview guide concerning the Managing Director (MD) role pursued
a strategic view of the business (vide extract in Appendix 1). Thus, it included requirements
for a detailed discussion about the competitive environment, about the required strategic
activity to deal with this external environment and it also included a concern with the
identification of the impacts on the design parameters of the organisation. Furthermore, there
was a requirement for addressing the dimension related to the strategic discussion of the
internal context of the organisation, as well as its related impact on the design choices of the
structure. Finally, the strategic decisions concerning PPC were included in the set of issues to
be discussed with the MD.
On the other hand, the interview guide concerning the section foreman was mainly
focused on operational issues. Thus, the competitive environment was ruled out, as well as
most of the strategic discussion referring to the external impact on the design categories of
the organisational structure. Nevertheless, there were links to the strategic decisions, e.g. the
positioning on the business context of the definition of the operational performance
measurement concerns. In addition, the internal context of the organisation – i.e. the work
structure of the manufacturing systems; the technology issues; the aspects related to both the
culture and power balance; and, the knowledge and training factors – was simplified and
related to the operational task of the foremen. Moreover, the role performed by the section
foremen concerning the PPC domain was targeted. Finally, aspects related to the impact of
some PPC policies on the foremen activity were also addressed.
At last, it should be added that there was a special care both to read the non-verbal
messages and also to the interviewer-interviewee relationship, during the interviews.

Dependability and credibility

To assure dependability and so, to contribute to both reliability and credibility especial care
was taken to avoid bias, as follows: (i) choosing clear research methods based both on a
strong methodological approach and validated models; (ii) documenting the research
processes, e.g. defining the purpose and planning of the field interventions ahead and,
reporting the findings back to the case study companies (Vilas-Boas, 2000; 2001); (iii)
keeping filed documents that recorded raw data, e.g. field notes and personal notes; and, (iv)
treating interviews just a short while after their occurrence, producing summaries and
syntheses that were kept on a database that was made available to anyone showing interest to
access it.
The credibility of the practical work was founded on a researcher’s attitude that (i)
attempted to gather the actor’s view placed into context; (ii) allowed sufficient time to learn
the company culture, to build trust and to test misinformation; (iii) developed a persistent
observation; (iv) triangulated the information collected through interviews with the one
coming from observation and reports; (v) reported back to the interviewees the results of the
interviews, in order to review misunderstandings; and, (vi) followed a dialectical approach
(Honderich, 1995: 198).

8
Findings concerning the contingency factors – a top-down analysis

Realised strategy of the business

TIM follows an entrepreneurial approach to strategy formation characterised by proactivity,
centralised decision-making, personal judgement, emergent strategies supremacy and
common sense. Size is not an option in order to avoid difficulties to maintain the level of
employment during tough periods. TIM considers the availability for the customer as an
important key success factor (KSF), i.e. a broad range of products and order change. Both
dependability and speed are the competitive base on which the company was built up, and
cannot become a straight-jacket for the organisation. In addition, TIM competes through a
low cost strategy, and its core competencies are technological – metal cutting, control
procedures and advanced design skills – and commercial with regard to a deep understanding
of the customer needs and specificities.
Figure 4 depicts three out of the four strategic business areas of TIM Lda, which are very
constant across time, as follows:

1 2 3

Source: TIM, Lda.

Figure 4 – 1.Special tools SBU: the crimping tools; 2.Machined components;

3.Cutting, embossing and progressive press tools

• The special tools (SPT) is very profitable, still growing and represents more than 50% of
the turnover. SPT is made up of small series of repetitive products to be delivered the
week after to the order placement. Deals are set annually, reviewed anytime, stressing
constant price reduction and quality. The linking sales manager emphasises the technical
role, also performing as a progress chaser to avoid delays (Figure 5);
• Press tools (PRT) include 150 to 200 components and might be of cutting, embossing and
progressive. Market is mature and stable, growing very slowly. It represents one third of
the company turnover. These products mean a long-term and reliable relationship with the
customer because of the after sales support and of the demanding quality requirements.
Design expertise is a core issue and as lead times are long – 10/18 weeks – and the due
delivery date is reasonably flexible (Figure 5);
• Subcontracted parts or components (PAR) show both repetitive and non-repetitive
demands, growing at a very slow rate (Figure 5). This SBU represents 10% of the
turnover and it is as attractive as PRT. Price looks the most important competitive criteria

9
 once that quality must be pre-assured. File transfer and CAD/CAM expertise are
important, in order to take advantage of the geometry defined by the customer, once that
most of the ordered components are already designed. The customer orders for both PAR
and PRT are subject to the appreciation of a previous quotation.
• TIM Lda is disinvesting in the spares SBU because the SPA jobs result on successive
unloading and loading of expensive machine-tools causing a serious delay impact on the
other jobs. In addition, the 1% share, split across far too many customers, placing low
value orders and exhibiting serious difficulties to pay is not attractive. Besides the
goodwill losses, SPA is not profitable despite customers are wiling to pay whatever is
asked to see the job done. Current policy is to accept only special customers and orders
from those that ask for other relevant work.

Some cross-business issues are, as follows: (i) the quality competitive criteria acts as a
qualifier that might easily become an order loser; (ii) the design capability acts as a core
competence, easily explained by the use of CNC machine-tools and of CAD competencies–
both internal, and from the customers; and (iii) the price emerges as a consistent ‘order
winner’ together with others that vary according to the area. PPC while directly related to
the due delivery date and to the delivery time criteria does have a relevant role to play
due to the importance of these criteria for all the SBUs, as follows: (i) SPT and repetitive
parts are ordered in small repeatable batches, SPT demand is regular and, PRT and non-
repetitive parts are one-off orders; (ii) PRT has got a very complex product structure with
many components and several levels, while other products very simple; (iii) most of the SPT
and perhaps some repetitive PAR may be adequate to a stock base ordering system, while the
products of the other SBU are adequate to a flow control ordering system; (iv) SPT present a
fixed single cycle ordering system and a pull demand, while others look adequate to both
multi-cycle ordering systems and push demand; and, (v) while SPT may be forecasted at least
on the long term, the other SBUs seem more adequate to flexible programming. In fact, these
points may determine different PPC designs for the several SBUs and so, different
relevance of the PPC procedures.

10
 Strategic business areas
Special Press Parts (PAR) Spares TIM
tools tools Non- Repetitive
(SPT) (PRT) repetitive (SPA) (as a whole)
Growth rate
/= /=  /=
Profitability ++++ ++ ++ + but  +++
Sales share 50-60% 30% 10% <1% -
Critical Success Factors
• Design capability
- Existence 3 4 1 1 2 4
- CAD expertise 2 4 1 1 1 4
- CAD/CAM expertise 4 4 4 4 3 4
- File transfer 2 4 3 3 1 4
- Frequent proj change 2 4 1 1 1 4
• Flexibility
- Set-ups 4 1 1 4 4 4
- Production volume 4 1 1 2 1 1
- Product range 4 4 4 3 4 4
• Quality
- Product performance 4 4 4 4 3 4
- Spec conformance 4 4 4 4 3 4
- Reliability 4 4 4 4 3 4
- Durability 4 4 4 4 3 4
- Quality perception 4 4 4 4 3 4
• Delivery time
- Very urgent
(yesterday)
-
4
-
-
-
4
-
4
4
4 ?
- Short - 4 - 4 -
- Average - - - - -
- Manuf LT<DLT
• Due delivery date
- 100% fulfilling
- acceptable<1 wk delay
4
-
-
4
-
4
-
4
4-
- ?
- acceptable<2 wk delay - - - - -
• Price
- Minimum 4 4 4 4 1
- Annually/periodically
set
4
4
-
-
-
-
4
4
-
- ?
- Continuously reviewed
- Importance of the - 4 - - -
learning curve
• After sales service
- Installation 3 4 - - - 4
- Warranty 4 4 4 4 4 4
- Maintenance 3 4 - - 4 4
- Changes - 4 - - 4 4
Key
Scale: 1 – bad or unimportant or unnecessary Other:
– increasing
2 – insufficient or slightly important or  – strongly increasing
slightly necessary  – decreasing
3 – sufficient or reasonably important or  – strongly decreasing
reasonably necessary = – maintaining
4 – good or very important or necessary ++++ – very profitable

Figure 5 – Summary of the main SBU features

11
External environment of the company
The motor industry is responsible for more than 90% of the TIM turnover, placing serious
requirements for quality certification, due date accomplishment, strict quality conformance,
constant price reduction effort and location close to customer site. Moreover, conformance,
control across distance and formal performance assessment build up on top of formal PPC
procedures and enterprise systems.
As regards market diversity, TIM presents a great diversity of products which results into a
great work diversity that should favour the use of the workflow as a criterion to group units.
Furthermore, there is a clear break on the demand characteristics between SPT and the
other SBUs (Figure 6), i.e. SPT is ordered and manufactured in small repetitive and regular
batch production, while the other SBUs present one-off unrepeatable and irregular order
quantities, i.e. jobbing-production or at most, jobbing-batch for the repetitive PAR. These
are the right conditions for a limited vertical decentralisation conducting to the
structure divisionalisation. However, the presence of core competences common to all
markets may stop divisionalisation.
TIM products are not very sophisticated, except the PRT that are of very difficult
understanding (Figure 6). Technology is reasonably sophisticated as the description of their
working instructions show. Beyond that, TIM customers are themselves manufacturers. So,
they tend to be sophisticated because they are demanding, require special attention and a
relationship based on trust that grows with time. The customer knowledge is directly
proportional to the customer power and inversely to the number of customers. In general, the
comprehensibility of TIM work is small which is a result of the complexity of the TIM
business environment. As a consequence, the possibility of the standardisation of the work
process is reduced, the decision-makers are overloaded and decentralisation is favoured. This
effect reinforces and magnifies the decentralisation needs introduced by the market
diversity despite centralisation being apparently favoured by the technology similarities
for all the SBUs.
The competitiveness of the sector and the high customer bargaining power generate a
dynamic environment that impacts the work predictability negatively and so, increasing
uncertainty. Those effects are magnified by the make-to-order (MTO) nature of the business.
Forecasting, stock policies and aggregate planning might only be possible for SPT. The
extreme unpredictability of the many SPA customers worsens the problem (Figure 6). These
aspects confirm the existence of a very dynamic competitive environment that subject TIM
manufacturing system to a highly changing pattern of demands that significantly affect its
work predictability in both short and medium term increasing uncertainty. The exception
appears to be the SPT. In the long term, it is expected that the industrial sector is still more
mature and so more competitive. New materials technologies favour uncertainty and so, an
on-going challenge to the improvement of quality, productivity and service, in order to
continuously strengthen and correct the competitive position. On the other hand, the creative
use of information technology, the management of the social environment of the company
and the constant technological updating may perform a relevant role in decreasing
uncertainty. Finally, less predictable work tends to require more mutual adjustment rather
than planning and control ‘systems’, grouping by work process and function rather than
product or market based on process interdependencies. Moreover, organic structures fit well
dynamic environments even if opposite influences come from the determinants size and
technology. In addition, organic structures favour liaison devices on the expense of
planning and control systems. This appears to be the case of press tools (PRT), parts
(PAR) and spares (SPA). Once again, special tools (SPT) exhibit the opposite set of
requirements.

12
 Hostility is inversely proportional to stability and it adds the intermediate variable of speed
of response (Figure 6). The speed of response of SPT – one week of fixed single cycle – and
SPA – few days of delivery time – cannot depend on the results of any rationale of queue
management. The acceptance of the weekly SPT call-offs and of SPA orders will necessarily
impact the schedules of both PAR and PRT. PRT are usually the ones that suffer the longer
delays because they have the longest lead times. TIM understood the first part of the problem
and is trying to get rid of the SPA SBU. Once again the SPT SBU appear to present
opposite needs from PRT, PAR and SPA.

Strategic business areas

TIM
Special tools Press tools Parts Spares (as a
(SPT) (PRT) (PAR) (SPA) whole)
Market diversity integrated diversified diversified m. diversified diversified
• Number of customers very few few few many many
• Product range narrow broad broad very broad very broad
• Demand
- Repetitivity repeatable unrepeatable (un)/repeatable unrepeatable ?
- Regularity very regular irregular irregular irregular ?
- Volume small batches one-off one off/<20 one-off small
• Work diversity limited nº of diversified diversified very diversified diversified
variations
Complexity simple very complex average average complex
• Sophisticated unsophisticated unsophisticated
knowledge of the products /sophisticated v. sophisticated /sophisticated unsophisticated sophisticated
• Sophisticated
knowledge of the v. sophisticated sophisticated unsophisticated v.unsophisticat. sophisticated
customers high high/average average/low very low high
- Customer power very few very few few many many
- Number of customers
• Sophisticated unsophisticated v. sophisticated sophisticated sophisticated sophisticated
knowledge of the
technology
• Work great little great/average great/average little/average
comprehensibility
Stability stable/dynamic dynamic (very) dynamic very dynamic v. dynamic
• Competition intensity high high very high very high high
- Business competitivity very high high very high very high very high
- Business rivalry very high high very high very high very high
- Business profitability high average average low average
- Business maturity very high very high very high very high very high
- New competitors some some many many many
- Negotial power
Suppliers very little very little very little very little very little
Customers very high high average very low high
- Replacements (< not expected some yes no some
5years) MTS/MTO MTO MTO MTO MTO
• Production type
• Work predictability average/high very low very low very low aver./very low
Hostility fair/hostile hostile (very) hostile very hostile very hostile
• Speed of response 1 wk, fixed 10-18 wks. vide contract a few days short/long
Source: Interviews carried on TIM Lda.
Figure 6 – Analysis of the dimensions of the external environment

13
 All dimensions of the external
Stable Dynamic environment, i.e. market diversity,
complexity, stability and hostility,
Decentralised Decentralised
Bureaucratic Organic
promote the grouping of the SBUs
Complex (standardisation & skills (mutual adjustment) into two major clusters, as depicted
in Figure 7. Thus, it might be
Centralised Centralised concluded that the external
Bureaucratic
Simple (stand. of work processes) Organic environment promotes
(direct supervision)
divisionalisation of the structure. If
the ‘need for decentralisation’
Key: Cluster 1 Cluster 2
Press Special
becomes an accepted fact, the second
Parts Spares
Tools Tools issue concerns the use of alternative
mechanisms to produce an equivalent
effect. For instance, work
Obs.: The circles size is directly proportional to the importance of the product type constellations promote the
optimisation of the implemented
Figure 7 – Structures matching the SBU clusters structure through a better liaison. The
reinforcement of planning and
control systems – traditional control
paradigm – might also be an alternative for TIM, through the increase of computer control to
deal with greater complexity and increasing variety.

Age and size of the company

TIM experimented very high rates of growth as regards both turnover and people. While the
early developments of the organisational structure were determined by the internal need to
support operations, in a second stage, there was a change towards a more proactive attitude.
The longitudinal progress of the formal structure shows a purposeful consolidation of the
management activities in TIM, which means: (i) better organisation of the resources – e.g.
introducing the Section Foreman; (ii) promoting the ex-Production Foreman to Operations
Manager (OM), allocation of the CNC Section to the Production; (iii) the formalisation of the
supporting functions – e.g. recruiting an engineer for Quality Manager, returning the design
activity to the company; and, (iv) the development of the functions dealing with the
transactional environment – e.g. recruiting some Salesmen, etc. While the new OM role
meant a vertical decentralisation of decision-making, the development of the control
functions – viz. Quality and Production Control, in addition to the Design integration
meant a selective horizontal decentralisation of production competencies from the
production management hierarchy to the technostructure analysts.
Moreover, mutual adjustment is the work co-ordinating mechanism that represents a
strong sign of the age of the foundation of TIM. Furthermore, in the late 1980s, the
company started to implement the standardisation of the outputs, through a brand new
quality department and CMM and it also purchased its first PPC package. At the same time, it
invested in CNC and CAD/CAM. Lately, the introduction of the Section Foremen
strengthened the direct supervision mechanism, helping to end the Technical Committee
liaison role (Silva, 1990: 42) and so, reinforcing the line management power. On the other
hand, the development of the work co-ordinating mechanisms did not address each of
the SBUs by itself, as Berry and Hill (1992) advised. If this was the case, for most of the SPT
and for some PRT products would be possible to use the standardisation of the work
processes, because of the existence of product standardisation that could result into routine
tasks.

14
Technical system of the company
Customer orders in SPT are both control and flow orders, which are highly standardised. The
outputs exhibit high standardisation because they are very uniform with few exceptions.
Some products are manufactured-to-stock (MTS) while others are kept in stock half finished
waiting for the definition of the
Transformation process flow order. In summary, SPT show
a closeness to long-linked
Standardised Non-standardised
technologies that is not shared by
Long-linked ?
the other SBUs.
/outputs

Standardised ?
In SPA the customer order is
Inputs

?
SPT
directly transformed into a work
Mediating Intensive
Non- PAR1 PRT order. Outputs are unique and the
standardised PAR2 transformation process shows
SPA
reciprocal interdependences. Non-
Key SPT – Special tools PRT – Press tools
repetitive parts are very close to
PAR1 – Repetitive parts PAR2 – Non-repetitive parts
SPA – Spares SPA in the Thompson
classification as Figure 8 shows.
After Hatch (1997: 140)
PRT appear to be standardised
Figure 8 – Technology Classification of Thompson with regard to some similar
components but they are very
different from each other with regard to the final product. There is some standardisation in
the transformation process which exhibits much reciprocal interdependence due to the
product complexity. Finally, repetitive parts (PAR1) show some standardisation on inputs,
outputs and process transformation for the same product, but varying significantly between
different products (vide Figure 8).
The knowledge component of the technology was appreciated by both the variability of
the task and the analysability of the problem for every SBU, according to the measures
presented in Figure 9. The results that are recorded on the table were based on interviews and
on direct observation from the researcher carried out in the ICSC. It was assumed the same
importance of all the measures and so, the same weighting was considered in the computed
averages. On the other hand, the column allocated to TIM Lda was filled with question marks
to stress that it is not possible to reach a balance to classify the knowledge aspects of the
technology required by the company as a whole.
Figure 10 depicts in a 2X2 matrix the results from the technology classification of Perrow.
Both spares and non-repetitive parts exhibit many exceptions and problems that are
difficult to define and analyse, which characterises a non-routine technology. Non-repetitive
parts appear to be better defined than spares because they are defined by the customer that
usually supplies the drafts.
Moreover, both special tools and repetitive parts show characteristics of non-routine
technologies. SPT look better defined because they keep on repeating more regularly than
repetitive parts. Despite repetitive parts presenting few exceptions within the scope of one
product, they vary a lot from product to product because the range of products is very broad.

15
 Strategic Business Units

PAR TIM
SPT PRT SPA
REP NON-REP
Task variability
• How many of these tasks are the same 2 2 5 3 5 ?
from day to day?
• To what extent would you say your work 1 2 5 3 5 ?
is routine?
• People in this unit do about the same job 1 2 5 3 5 ?
in the same way most of the time.
• Basically unit members perform repetitive 1 1 5 3 5 ?
activities in doing their jobs.
• How repetitive are your duties? 1 2 4 3 4 ?
Average 1,2 1,8 4,8 3,0 4,8 ?
Problem analysability
• To what extent is there a clear known way 5 4 1 3 1 ?
to do the major types of work you normally
encounter?
• To what extent is there a clear defined 4 3 2 3 2 ?
body of knowledge of subject matter which
can guide you in doing your work?
• To what extent is there an understandable 5 4 1 2 1 ?
sequence of steps that can be followed in
doing your work?
• To do your work, to what extent can you 5 4 2 3 1 ?
actually rely on established procedures and
practices?
• To what extent is there an understandable 5 4 1 2 1 ?
sequence of steps that can be followed in
carrying out your work?
Average 4,8 3,8 1,4 2,6 1,2 ?
Observation: Task variability ranges from Few (1) to Many (5) Exceptions
Problem analysability ranges from Ill (1) to Well (5) Defined and Analysed
Source of the data: Interviews carried on TIM Lda in 2000
Source: After Withey et al (1983) in Robbins (1990:183).

Figure 9 – Measuring the work unit technology

Task Variability
Few exceptions Many exceptions
SPA
Analysability

2 3 4
Craft Non-routine
Ill defined & PAR2
Problem

2
analysed
PRT
3
Routine Engineering
Well defined 4
PAR1

& analysed
SPT

Key SPT – Special tools PRT – Press tools

PAR1 – Repetitive parts PAR2 – Non-repetitive parts
SPA – Spares

Source: Based on Perrow (1967) in Robbins (1990:184).

Figure 10 – Classification of the knowledge dimension
of technology per SBU

16
 This means that they could slide along the diagonal. Finally, the press tools exhibit a large
number of exceptions in the final product, but they do have many similar components.
Therefore, the task variability was rated average. The problem was considered ill defined and
difficult because despite being handled in a rational and systematic manner, it is very
complex.
The CNC technical system is more sophisticated than the traditional one, demanding more
operators training. It also regulates more their jobs. It is the CNC programmer that makes the
operators work routine and predictable by its regulation. When compared with mass
production, the sophistication effect is more important than the regulation one. The
impact of CNC machines is, as follows (Figure 11): (i) by the effect of sophistication, they
take power from the Production Manager redistributing it by the analysts of the
technostructure (selective horizontal decentralisation), by the CNC Foreman and the
operators (vertical decentralisation); (ii) by the effect of regulation power is taken from the
operators and concentrated in both
Sophistication Regulation
Effect Strategic Apex
Effect Strategic Apex the CNC Foreman and the
Production Manager (vertical
Technostructure Technostructure

Selective Horizontal 1
centralisation). However, power
Decentra lisation
balance favours the
Production Mgr. Production Mgr.
1
Power
sophistication effect and so the
Vertical Decentralisation

Middle Middle
empowerment of the operating
Vertical Centralisation

Design Office Line Line Design Office

Selective Horizontal
Balance core, resulting into a more
Decentralisation 2 organic structure and into more
CNC CNC
Programmers
Foreman
2
Programmers use of liaison devices, e.g. the ex-
Foreman

technical committee. A practical

effect of regulation is that it is easy
Operating Core Operating Core to replace a CNC operator despite
being very mobile with regard to
Figure 11 – The impact of AMT on structure employment because of high
market demand.
The technology expansion in TIM shows an incremental approach to capacity change
(Hill, 1993: 119) being reactive, oriented to investment return and resulting into a messy
layout. However, this provides a great ability to divide the technology and so, high
flexibility to deal with the potential divisionalisation of the structure.

Past patterns pursued by the structure

Two models were chosen to describe the current status of the structure, i.e. the formal and the
work constellations models.

The formal authority system

TIM Lda has a line and staff structure that is divided into four main departments led by a
Managing Director (JP) who is also the owner. The organisational chart will be superimposed
to the five part model of the organisation proposed by Mintzberg (1979: 20), as Figure 12
depicts.
The administrative department (6) is physically bounded to finance (2) but in the
organisational chart they are split because while the former is part of the support staff, the
latter belongs to the technostructure (Figure 12). This(ese) department(s) is(are) headed by
HF the other owner (vide Vilas-Boas, 2000: 55, for detail).

17
 Strategic JP (1)
apex

(4) (5)
HF (2) JP (3) AL JP HF (6)

TF (7) TF (8) TF TF
(9) (10)

Outbound logistics
MS (11) (12) AAA AA (13) AL AAA AA
Inbound logistics

LD (14) (15)(16)
(17)
Sub RP JD JB
Middle
(18) (19) (20) (21) (22) (23) line
(24) SA (25) SA
Technostructure

T (36)
Support staff

LD AL (28) AMR (29) AMR (30) AR (31) AT (32) (33) (34) PP

(27) RS (35)

(26)

Operating core

Source: In Vilas-Boas (2000:55).

Figure 12 – Formal flows of authority

The quality department (11) which is part of the technostructure is led by MS. It provides a
metrology service through the laboratory (18) and is responsible for the quality assurance
manual and procedures (TIM, 2001). Its positioning in the organisational chart below the
other first line departments shows the actual power of the quality function. In fact, the
attention given to quality still looks below the one that should be expected from its
importance for the business as a critical qualifier despite it has progressed considerably in the
last years.
AL is the typical ‘super-foreman’ that was promoted to operations manager. The
production department (5) has the following staff: LD (17) as the production controller, T
(36) as the tools and maintenance storekeeper and, RS (35) as the CNC programmer.
Moreover, in the direct hierarchical line of the production department there are six section
foremen, as follows: (i) AT (32) in the milling machines; (ii) AL (28) in the heat treatment
and polishing; (iii) AMR (29, 30) in the grinding machines and lathes; (iv) AR (31) in the
presses and finishing; and, (v) JP (33) that was replacing the CNC foreman that had quitted
the job. The inbound logistics, i.e. purchase (26) and reception & storage of raw materials
(27) is managed by LD, which depends from the Production Manager, AL (4). The outbound
logistics, i.e. the finished product warehouse and the expedition are managed by PP (34) who
is also dependent from AL (4).

The work constellations

The existing work constellations that add some horizontal informal flows and common
interests from people that work together to the formal vertical authority structure are, as
follows:

(i) JP (Managing Director) + HF (Finance and Administrative Manager) – recruiting

policies, personnel selection, disciplinary action, remuneration policies. If there are

18
 disciplinary problems to be sorted out AL (Production Manager) also joins the work
constellation.
(ii) JP (Managing Director) + HF (Finance and Administrative Manager) – definition of the
business strategy.
(iii) JP (Engineering) + AL (Production Manager) – core issues of operations management,
e.g. some demanding estimating and quotation activities, equipment choice, layout
modification, CNC decision-making, annual budgeting, some customer/order issues,
etc.
(iv) JP (Engineering) + CNC Foreman – CNC issues, ranging from work preparation and
machine programming to machine operation and maintenance. This is an interesting
constellation because, instead of contributing to the empowerment of the operating core
(Figure 12), it centralises more decision-making power in the strategic apex, through
the action of JP, at the same time that subtracts power to the production manager.
(v) JP (Engineering) + AL (Production Manager) + AAA (press tools engineer) –
estimating, quotation and delivery times of press tools. The difficulties affecting PPC
concern the way that the due delivery dates are established. Thus, this constellation
should work with the Production Controller when required.

Power and culture

The TIM culture reveals an entrepreneurial core based on a proactive attitude in people that is
supported by a paternalistic authority system led by JP, who also is the owner and, by AL, in
the plant, as an element that hides much more power than the authority he is formally
invested. The organisational truth is established relying on knowledge, wisdom, leadership
and ownership which are the glue that maintain the organisation together. This culture,
targeting to satisfy the customer most peculiar requirements integrates three main diverse
groups, as follows: (i) the SPA SBU present very reactive requirements, that are contrary to
any planning scheme rather than the practised political decision-making; the ‘customer
verbal-orders’ are usually required for ‘yesterday’, directly breaking into the plant with no
respect for any rules; (ii) the special tools SBU culture that is based on a strong proactive and
responsible attitude; due delivery dates cannot be missed, single cycle products, fixed lead
times, i.e. one week and, not acceptable defects represent a radically different approach; and,
(iii) both the parts and the press tools SBUs that present the traditional culture of commitment
to get the things done minimising the conflicts of interest.
Another issue that is also relevant for the organisation culture is the managing
director role. Despite the omnipresence of JP being understandable, very much welcome and
respected by TIM collaborators, his strong participation in operational issues results into two
problems, as follows: (i) strong dependence on his leadership; and, (ii) he is lacking time for
the institutional issues. This is a difficult issue because in family businesses there is usually a
strong orientation to stay in control and so, oppose delegation or vertical decentralisation.
As regards ownership and members personal needs the main mechanisms to legitimise
power are knowledge, experience and, both recognition and acceptance from the
members. For instance, engineering and commercial know-how, as well as technical CNC
knowledge are factors that have contributed to consolidate the power of JP as a respected
managing director, besides being the owner. On the other hand, AL has a considerable
amount of ‘hidden’ power, in addition to the one coming from the formal authority system,
based on the number of working years to the firm, on his know-how, on his closeness to the
owners and on his popularity among the production operators. The confirmation that, in TIM,
power does not come only from the position in the organisational chart is given by the

19
difficulties experienced by the Quality Manager (MS) in affirming the quality view and
procedures.
Finally, three types of external pressures were identified, as follows: (i) quality assurance
through customer audits; (ii) acquisition of fresh capital from external sources, and (iii)
industry best practices, e.g. TQM, CNC and Enterprise Systems.

Strategy revisited: Information systems/information technology strategy

The automation of the routine clerical and management tasks may contribute to cost
reduction, delivery time improvement, due date achievement and to error-free products. Thus,
resources may be moved to critical tasks, as follows: shop floor data collection, e.g. time and
attendance recording, work order data, equipment utilisation history; issuing of shop
documentation, recording the consumption and allocation to work orders of materials. A
database that cuts across the several functional departments of the organisation should
provide horizontal support to all the business processes of TIM in order to support a more
accurate and real-time image, on the administrative side, of what is happening in the shop
floor. On the other hand, (i) the implementation of the bill of materials, (ii) the definition of
processing operations, equipment records and sequences of operations for the manufactured
materials, (iii) the definition and releasing of work orders, route sheets and operation tickets,
(iv) the online data gathering through proper input devices and, (v) the displaying of this
information in online workstations, electronic panels etc. are examples of PPC activities
related to general data collection and processing activities that use the IT infrastructure.
On the other hand, the IT infrastructure provide a core support to the interfacing between
the customer, the engineering department and the plant, e.g. the technical data transaction
through ‘igs’, ‘vda’ and ‘surf’ data format files. There also are advantages with regard to
the integration between the technical and the administrative systems for both of them
and, also for TIM as a whole. For example, PPC could benefit from the data introduction
concerning the new order opening such as the bill of materials and, engineering could take
advantage of operation sequences for components already defined and quoted that could be
used with little modification for new orders, e.g. in the PRT SBU.

20
Discussion

Impacts of the technical system, external environment and, age and size
The models of Thompson and Perrow show agreement with the division of the SBUs
into two clusters. One cluster is made up by the SPT SBU and is related to the routine and
long-linked technologies. The other includes the remaining SBUs and is related to the non-
routine and intensive technologies. These findings agree with the ones coming from the
external environment which reinforces the arguing for the need to split the two clusters.
The current replacement of old equipment by CNC, stresses a movement towards a more
organic structure. Moreover, the suggestion of mutual adjustment and decentralised structures
for ‘cluster 1’ agrees with both decentralised PPC needs and role integration for this cluster,
as a consequence of the used AMT, according to Figure 13. In the same way, the suggestion
of direct supervision and more centralised structures for ‘cluster 2’ agrees with both
centralised planning by manager and supervisor handling shop floor issues. This is also
suggested in Figure 13 for less product variability and smaller number of products, i.e. the
case of ‘cluster 2’. In summary, there is agreement between the effects on the structure of
both the external environment and AMT use.
In addition, these findings explicitly stress the need for the adaptation of the work co-
ordinating mechanisms to the SBUs as argued for, when the age and size imperative was

Source: Child (1987, in Winfield, 1991:83).

Figure 13 – AMT and organisational design

previously analysed. Thus, there is complete agreement with the findings concerning the
age and size section.
Finally, the type of capacity increment and the potential of TIM technology for
divisibility of the technical system support the possibility of implementation the already
cross-checked idea of the two clusters.

Impacts regarding the current structure as a result of the patterns pursued

Formal and informal liaison roles are an important means of control that might complete very
well the formal control procedures. For example, some opportunities for other work

21
constellations were found, as follows:

(i) JP (Managing Director, Engineering) + HF (Finance and Administrative Manager) +

AL (Production Manager) + MS (Quality Manager) – performance assessment;
remuneration policies; computation of the machine hour rates; capacity policies, i.e.
extra time, shifts, subcontracting; data collection procedures; development of multi-
skilled operators; activities to strength the organisational culture; TQM policies etc.
There should be different requirements for the leadership of the several issues, e.g.
while performance issues could be led by HF, TQM issues should be led by MS.
(ii) JP (Engineering) + AL (Production Manager) + MS (Quality Manager) – quality
assurance strategy and procedures, demands and needs of the customers, quality
performance, continuous improvement, etc.

Moroever, AL is a very pragmatic Production Manager that links with the Section Foremen
following a mixed work co-ordinating mechanism made up of both direct supervision and
mutual adjustment. Consequently, the structure of the TIM manufacturing system is
mainly organic, because of the following reasons: (i) customised satisfaction of the customer
needs; (ii) significantly diversified operations requirements; (iii) decentralisation of technical
knowledge; (iv) decentralisation of decision-making power; (v) increasing trend on the
operating core towards professionals, i.e. towards a decrease in specialisation; (vi) strong job
competition for resource attention; (vii) preference for lateral/horizontal communication
within the management line ‘hierarchy’; (viii) preference for informal communication; (ix)
close relationship between line management and technostructure; (x) closeness of the
strategic apex; (xi) mutual cross-support among almost everybody; (xii) relevance of the
personal and individual relationships, rather than loyalty, formality and strict discipline; (xiii)
individual commitment rather than obligation; (xiv) continuous readjustment of task
definition rather than fixed and long last objectives; and, in summary, (xv) many conflicts of
interest. Moreover, the role of the work constellations is relevant as regards filling the gaps of
the formal structure and also, in providing the flexibility required by the organic structure. An
opposite trend concerns the participation of JP in practically all the work constellations,
which is a signal of centralisation of some of the decision-making and also, of the needs of
power of the members. Despite the latter issue, the organic trend in the structure looks
appropriate to the PRT, PAR and SPA SBUs and it agrees with the previous findings
for the technical system, external environment and age & size.
With regard to SPT, there is an empowered engineer in charge that also is their salesman
(AA). AA also performs a progress chaser role, manages the SPT stocks, looks after the
product quality and manages the customer orders. This is a centralised mechanism of direct
supervision that lies outside the formal authority flows of the plant but that has been
found a good way to assure the accomplishment of the SPT fixed single cycle order of one
week. It should be added that this procedure has resulted fairly well within the organic
structure, using a successful mutual adjustment way to deal with the Production Manager. To
sum up, the findings concerning the pursued past patterns provide further confirmation
of the previous findings relating to the different needs of ‘cluster 2’.
However, a final balance addressing TIM business as a whole, shows that there is an
important gap concerning the implementation of formal procedures to assess the
performance, perhaps due to the inexistence of regulated flows of information. In fact, there
are some non-routine, non-programmed and informal processes that support ad-hoc decisions
outside the established procedures which impact the normal functioning of the organisation.
One example is the acceptance of customer verbal orders to produce SPA without taking into
consideration the existing machine loading queues. Actually, collaborators would rather

22
dedicate their ‘precious’ time to sorting out problems than worrying about reflecting and
recording their decision-making actions in figures, records and archives. This attitude results
from a company culture that might have to change as the organisation grows and, as a
consequence, behaviour becomes more formalised. Indeed, some historical data should be
collected and processed, in order to support some later decision-making, such as: simplifying
the product range, improving loading effectiveness and accomplishing the delivery due dates,
driving improvement action, promoting internal audits by customers, tracing productivity and
business competitiveness, among other. This is a need that also looks aligned with the
competitive stress put both on quality and technology in line with the external environment
demands, as already justified at a more general level.
Indeed, product contribution margins, operation times and efficiencies, scrap indices,
quality data and information, resource utilisation and production output data, maintenance
data are examples of data that are not kept as a clear signal that the company keeps from the
age of the foundation. In effect, during a long period the emphasis was placed on
production and management was very qualitative, very informal and, many times
motivated by outside pressures (Silva, 1990:7). Three of the questions to be asked are about
the break-even points for (i) the human capacity to informally file and process information;
(ii) for the validity of the decision-making based on the business feeling; and for (iii) the
human ability to informally cope with the management issues in a cost effective way, without
incurring into a serious disaster. It might be the right time to study the benefits and the
costs that might be brought by regulated flows of control and effective planning and
control systems. However, this might not be easy to quantify (Neely et al, 1995). Most
probably it will be a qualitative, political and/or strategic decision.

Impacts regarding the power and culture issues

TIM culture, as a whole, has shown really strong in order to cope and integrate the
diversity of cultures of the different SBUs and interests. It relies on powerful cohesion
mechanisms, such as, the personal abilities of the leaders to adjust mutually, the character and
the image of the founder, a strong group dynamics and the firm core competencies. In fact,
these mechanisms are so
powerful that, in ten years,
the company adopted new
technologies, doubled in size,
moved to newer premises,
but maintained the same
social and cultural cohesion
pursuing a diverse-
integrated model in PRT and
Source: In Hatch (1997:226).
PAR. On the other hand,
Figure 14 – Organisation culture as a continuum SPT has clearly followed a
between integration and differentiation diverse-differentiated model
(vide Figure 14) as well as
SPA, despite the supporting rationale being radically different. While the special tools
represent completely new demands from the newest and most important market, the SPA
SBU concerns very old demands from the age of foundation.
The disadvantage of TIM culture is that some changes, may face increased
difficulties due to the strong attitude oriented to preserve the values and the stability of
the functioning parameters. For instance, the control procedures have suffered from great
rejection, as follows: the PPC software from Missler (GPM) never took off properly. In fact,

23
the standardisation of procedures is a threat to the established nuclei of power, e.g. the
production management activity of AL. In addition, other sectors, e.g. SPT, may become
other power nuclei where centralised control might be difficult to be exercised. This might
generate an organisational reaction following the cultural example of production
management. Indeed, TIM has already started to pay a price for the lack of standard
procedures. This was the case of the replacement of the former quality manager, which
delayed the quality certification process for, at least, one year. In this case the organisational
culture reacted against a challenging culture – The Total Quality Management – creating
great difficulties to change and taking a long-time to settle down. On the other hand, the CNC
implementation is an example of successful change that should be investigated. One reason
might be the existence of an empowered winning champion that is JP. His total commitment
to the subject might be pointed out as the main cause of success.
In summary, a more organic
structure, cheaper, more reactive,
more decentralised, more
motivated and mainly using
mutual adjustment as the work-
coordinating mechanism has been
an important source of competitive
advantage for TIM. However, these
are the very same factors that may
also cause troubles because the
structure is more dependent on
individuals, is reactive to regulation
and to clerical processes and so, is
more unstable and inconsistent.
These two trends do require a very
sensitive balance effort.
Finally, as regards external
Source: In Ward and Griffiths (1996:32). control, the horizontal unions
across the engineering sector are
Figure 15 –Business contribution of IS
not very enthusiastic about multi-
skilled jobs. In fact, both the societal culture and the law clearly promote the definition of
many professional categories. However, SPT favours a market based grouping criteria,
which, in turn, requires multi-skilled operators. This might create a serious potential
conflict of interests. Moreover, other external pressures are increasing the demands for
external control through more regulated flows, instead of ad hoc and informal procedures
and also, through more formal mechanisms to assess performance. Thus, the use of
procedures leading to the standardisation of results, as work-coordinating mechanisms,
e.g. TQM and Enterprise Systems, is starting to show up as required to satisfy both
different internal management needs and the predicted external requirements of
information. However, neither consultants, nor software vendors or bank managers have too
much influence in TIM, because both JP and HF, i.e. the top decision-makers, are well-
educated and can understand the company needs. The most important external pressure
comes from the customer, whose needs are mandatory in the automotive market. At last, the
power of fashion should not be overlooked, in order to avoid that fashionable best practices
like the PPC package GPM from Missler, which never worked properly in TIM.

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Impacts regarding the IS/IT strategy
Under a strict tactical view, the IT infrastructure is relevant to the implementation and
performance of the work co-ordinating mechanism that is the standardisation of the
results because it enables a working base for the implementation of the cost control, quality
control and PPC procedures.
In TIM, IT has not had an explicitly assumed strategical approach, because; (i) it has
had functional approaches, i.e. the engineering concerns have been treated in a very different
way from the administrative ones; and, (ii) the expense in IT, especially for administrative
purposes, is not yet seen as an a strategic investment. On the other hand, the attitude
towards IT has becoming more strategic, despite yet informally, as follows: (i) the
amount of capital invested in IT has been calling the attention of the top management; (ii) the
IT investments in the technical systems are clearly searching to support the competitive
advantage of the business; and (iii) the company is both more involved in benchmarking
exercises with the competitors and in looking for IT support to overcome the found
weaknesses.
CAD, CAD/CAM and CNC machines are key operational systems (KOS), within the
portfolio to classify information systems (e.g. Figure 15). Costing systems are also found
KOS because they are related to the low cost strategy pursued by TIM and so, they are
required for the day-to-day working of the organization. However, both PPC and quality
assurance were considered as strategic applications that had not been absolutely
required for the day-to-day operation until the time of carrying out the field work, but
they might have a significant impact in both the organisational structure and the critical
success factors.
Meanwhile, two main issues arise. First of all, top managers of TIM are very much
aware that a significant IT investment would rise the administrative overheads to such
high levels that it could result on increasing the business break-even point. In turn, this
would change the competitive position of the company, perhaps, pushing it away from the
pursued generic low cost strategy. On the other hand, there is a need from IT support and
investment to put into place the systems predicted by the certification process. In fact,
balancing these two interests is not an easy strategic task because it is neither merely
quantitative, nor it cannot hang around without direction.
Secondly, TIM should remember some bad experiences of the Past, e.g. the selection and
implementation of the computer-aided production management package GPM. In fact, the
implementation of both information systems and information technologies should
pursue a strategic approach. This path should also take into consideration some popular IT
policies, as follows: outsourcing, downsizing, legacy systems, role of the IS/IT department,
project evaluation, use of web-based software, standardization, customization and proprietary
systems, security, among others. The maximum care should be taken, once that wrong
choices of these strategic systems may even threat the company survival.

25
Conclusions

Links with the research propositions

The reported approach to the industrial case study was focused on the manufacturing task of
TIM, discriminated by the SBUs and then, related to the competitive environment. Thus, the
determinants of the organisational structure of TIM were analysed taking into consideration
the recommendations concerning the conceptual positioning of PPC – first proposition about
the relevance of PPC procedures.
Moreover, the determinants of the organisational structure of TIM were also analysed
taking into consideration the recommendations concerning structural congruence and
conceptual consistency – issues labeled as (i), (ii), (iii) and (iv) – as defined in the second
proposition about the relevance of PPC procedures. In addition, further work complete the
analysis of the second proposition addressing the conceptual consistency between PPC and
all the remaining design parameters of the manufacturing system of TIM – issue labeled as
(v). Further work should also analyse the consistency between PPC and all the remaining
design parameters with regard to their implementation and operation – i.e. the third
proposition.
As above mentioned, the recommendations related to the proposition about PPC
congruency were considered when addressing the realized strategy of the business. In fact,
the top-down analysis that was previously carried out attempted to show the impact of the
current status of the TIM determinants on the relevant parameters of the definition of its
manufacturing system. As further work, the approach should be reversed, i.e. a bottom-up
analysis based on the design parameters of the manufacturing system should cross-check and
is also expected to consolidate the previous top-down findings, focusing on the perspective of
PPC.
According to the paragraph on control procedures that follows, this paper has already
presented significant findings that empirically confirm the requirement for consistency
between the implementation and operation of design parameters. This type of consistency is
stated by the third research proposition.

Empirical findings concerning the manufacturing systems structure

This paper reports the identification of different SBUs for TIM and their classification
according to significant differences both in terms of products and competitive strategies
(Figure 5). These could require different types of PPC procedures and/or different structures
for the manufacturing system. Furthermore, the SBUs could be grouped into two clusters
according to the market dimensions under review (Figure 8), i.e. diversity, complexity,
stability and hostility.
In addition, the two different types of structures that were found adequate to fulfill the
needs of each of the clusters (Figure 5) were also confirmed by the type of technical system
(Figure 8 and Figure 10), by the use of AMTs and, generally, by the longitudinal progress of
the work-coordinating mechanisms across time. Moreover, the used technology was also
found easily divisible, which strengthen the potential for TIM divisionalisation according to
the previously mentioned clusters.
Even without physically different premises, some operators already tend to work most of
their time to ‘cluster 2’ that also has its own progress chaser that is the engineer salesman. In
addition, special tools require special following-up procedures to avoid mixing with the other
products and so, missing the fixed delivery times of one week.

26
Empirical findings concerning the control procedures
The ‘formal’ control procedures of the structure, i.e. PPC, quality and cost control, were still
found implemented in a very informal way. The tradition has favoured qualitative informal
systems, humans as the main way to store and process information, an organic structure,
small overheads and a low break-even point.
Nevertheless, relevant external pressure to implement formal performance assessment
schemes was anticipated. This pressure is from both the customers and from prospective new
shareholders, as well as from the needs generated by the acquisition of other firms. Moreover,
it has resulted into functionally isolated initiatives in the quality assurance certification that
may cause a negative impact on PPC that is requiring urgent correction to avoid a fashion
effect.
The implementation of the control procedures – i.e. mainly PPC and quality control – have
experienced difficulties in the Past and should also expect troubles in the Future due to a
strong integrative company culture and due to the attitude of the two most influential
members, i.e. JP and AL.
In addition, any implementation effort targeting the control procedures will need the
operational support of IT and the development of a strategically favourable environment to IS
progress.

Summary of the findings

The main findings of the reported empirical exercise are, as follows:
(i) Physical and operational needs to divisionalise into the two clusters that were found.
This means a new relationship between the contingency factors and PPC
implementation and operation that should be considered in ‘proposition 3’.
(ii) Requirements for developing formal control procedures, viz. PPC, quality control and
cost control. In particular, PPC should be customised to the different SBU needs. Cost
control should provide the base for the traditional quantitative performance assessment
to be implemented.
(iii) Acceptance of the relevance to develop the control procedures within the scope and the
guidance of the previously set propositions about congruence and consistency.
(iv) Both the work constellations and the divisionalisation cannot entirely replace the
outcomes from the control procedures and vice-versa. They do have different roles.
Therefore, all of these mechanisms will be looked as complementary and their roles
should be understood within a dialectical view and so, promoting convergence not
competition among them.
(v) Need to formulate a strategic decision with regard to divisionalisation based on a higher
working break-even point and consequent need of business growth, as well as, on the
competitive environment progress.
(vi) Illustration of the use of the ‘issues leading the enquiring questions’, coming out of
theoretical validation exercise, to successfully recognise potential change, to develop a
learning process to classify change as desirable/undesirable – e.g. vide above (i), (ii),
(iii) and (iv) – and to start identifying political/social issues to check which desirable
change process was culturally feasible/unfeasible – e.g. vide above, paragraph (v).
In line with the theoretical validation of the conceptual framework (Vilas-Boas, 2009a) these
findings should be cross-checked and further developed by the findings concerning the
emergent strategy that are coming from the analysis of the manufacturing systems structure,
i.e. from its defining categories of decision. This should be the essence of the bottom-up
analysis to be carried out as further work that will enable to choose the feasible change from
the identified as desirable in this paper.

27
Final conclusion
In summary, the confirmatory purpose of this enquiry should be understood within this
context, as follows: an expected relevance of the PPC procedures identified by the
application of a theoretically validated conceptual model, in order to develop and
improve understanding of a specific situation. Thus, the relevance of the PPC
procedures – found by the application of a ‘diagnostic checklist’ that is the outcoming part
of the validated conceptual model – was thoroughly discussed within the context of the
situation. In the scope of this investigation, no quantitative feedback measurements were
taken, in order to validate the research outcomes. As previously stated this was an option of
the research design.
Moreover, the strategic impact of this empirical test is expected to be significant, because
the exercise is closely linked to the strategic issues of the business. Thus, a contribution to the
creation of distinctive competitive advantage is a legitimate expected outcome. On the other
hand, most of the learning and discussion with regard to the reviewing of the ICSC
structure would have been lost, if only rival PPC best practice approaches were
followed. Thus, it might be concluded that, at first sight, the methodology looks useful, at
least, for this ICSC.
In fact, the presented empirical test provided a significant confirmation of the usefulness
of the enquiry tool to approach the organisation change in an independent way but focusing
on the business interest. Indeed, the debate generated about possible changes within the
perceived problem situation – following a top-down view – led to a continuous discussion of
the potential changes to the manufacturing systems structure. Thus, the consequent relevant
learning that resulted about the research situation led to the specific identification of desirable
action to be taken with regard to the PPC task.

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Appendix 1 – extract of the issues to be covered in the interview with the Managing Director

In general, the Managing Director (MD) role is mostly characterised by a strategic activity,
carried out on the medium/long term horizon and making decisions that affect the whole
organisation. However, it should be stressed that the strategic definition should be part of a
team exercise for the Board of Directors, even in the entrepreneurial environment of a SME.
The following are the aspects that were found relevant to discuss with the Managing Director
in order to find out his view of the business. These topics provided orientation and
guidance to a semi-structured interview.

Initial description of the function

- Definition of the task; brief description of the most significant activities;
- Identification of the contribution to the core competencies and competitive advantage
of the firm;
- Definition of functional links and communication;
- Description of the core means and tools required to do the job.

Characterisation of both the competitive and internal contexts

- Requirements for the organisation

• Business, organisation;
• Role of people;
• Products;
• Information Systems/Information Technology.

- External environment
• Approach the external environment of both the SBUs and whole company.
• Environment dimensions;
• Indicators of globalization;
• Behaviour of the markets;
• Used resources;
• Technology progress;
• Discuss the environment imperative.

- Age and size

• Determine the signals reflecting the organisation age;
• Organisation size: physical capacity; available personnel; inputs and outputs;
resources; specialist support; the involvement of senior managers; people
involved in significant decision making; time available for top managers to
think; owners role; external control; management positions, unit dimension,
responsibilities, differentiation and administrative component; organisational
tasks; structural components; homogeneity and heterogeneity; overheads and
economies of scale.
• Discuss the age & size imperative.
…etc

The remaining of the Interview Guide can be accessed in Silva (2002: 468).

30