Thursday, September 22, 2011

Organization Theory - 10

In the earlier blog, we looked at the case of IBM to understand the various aspects of complexity. To understand the meaning of "Horizontal differentiation" we begin the journey today with a very common place concept we have hear of "division of labor".

In ancient days we had specialized experts in their crafts whom in some cases called artisans, carpenters, etc. As late at the early part of 1900s we could see people who were very interested in the "art" building cars, getting along all the components of a car and building them. It wouldn’t be surprising given the varying skills that go into making a car - that it would have taken them anywhere between 3-6 months to prepare a single car! But today we have Toyota which has the capability of actually churning out a car every second!

Now this journey from one person "crafting" a car to the present day one car every second didn’t happen in a go. We would definitely deal with the variety of changes that have happened in the manufacturing processes sometime in the future, but what we would discuss today is the first step that happened in this direction - "division of labor".

The craft of building a car was broken down into a series of activities, say designing the exterior, preparing the chassis, etc. The different activities when focused by an individual in a team would reduce the strain on individual building the complete car - therefore overcoming the physical limitations to a certain extent. Since a particular task is done by a specific person, it would enable the person develop a certain degree of specialization and expertise enabling to enhance the speed of operations. Efficiency creeps in due to this special focus. As the person spends time on a specific activity, he would work at easing his job by creating special inventions also which further enhances the efficiency in the long run!

As the division of labor increases, departments with a specific focus begin to be built! This is the birth of departmentalization.

In the next blog we would discuss a bit more on the concept of "specialization" that we discussed in here.

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