Download Global value chain restructuring and the use of knowledge

Global value chain restructuring and the use of
knowledge and skills
Monique Ramioul - HIVA-K.U.Leuven
Bert De Vroom - UT
CIT3-CT-2005-006193
European Commission
Copyright (2009) © Work organisation and restructuring in the knowledge society - WORKS project
Project number: CIT3-CT-2005-006193
All rights reserved. No part of the report may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording; and may not be
quoted or cited, without prior permission in writing from the Project Co-ordinator.
The material in this report draws on the collective work of the WORKS consortium, funded by the
European Commission under its 6th Framework Programme, and the copyright is held by the WORKS
project. However the views expressed in this report are those of the named authors and do not necessarily reflect the European Commission’s official view on the subject nor that of the consortium as a
whole. The Community is not responsible for any use that might be made of data/information appearing therein.
Contents
1
Introduction
1.1 Theories and concepts
1.2 Quantitative research
1.3 Qualitative research on organisations
1.4 Qualitative research on individuals
1.5 The policy pillar
1.6 Introduction to this report
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The role of knowledge in the restructuring of global value chains
2.1 Assumptions and research questions
2.1.1 Value chain restructuring
2.1.2 Theories on knowledge and knowledge codification
2.1.3 Knowledge codification and managerial strategies
2.2 The case study results
2.2.1 The clothing industry: integration and fragmentation
2.2.2 Software development: focus on the international division of labour
2.2.3 Research and development in IT: between research and market
2.2.4 The food sector: between local embeddedness and internationalisation
2.2.5 IT in public administration: between eGovernance and context
specificity
2.2.6 Customer services in the public sector: fragmentation of the value
chain
2.3 Conclusions
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The organisational implications for the management of knowledge
3.1 Assumptions and research questions
3.2 The case study results
3.2.1 The clothing industry: closing the loop?
3.2.2 Software development in the private sector and IT in public
administrations: the prisoners’ dilemma of knowledge sharing
3.2.3 Research and development in IT: how long will ‘the secret garden’
exist?
3.2.4 The food sector: the key role of experience-based knowledge
3.2.5 Customer service in the public sector: segmentation and codification
3.3 Conclusions
3.4 The learning organisation in Europe?
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CONTENTS
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Changes in skills
4.1 Assumptions and research questions
4.2 The case study results
4.2.1 The clothing industry: moving up the value chain
4.2.2 Software development: despite formalisation no clear deskilling
4.2.3 Research and development in IT: combining divergent skill
requirements
4.2.4 The food sector: deskilling of blue-collar work
4.2.5 IT in public administration: upskilling but less discretion
4.2.6 Customer services in the public sector: growing importance of
communication skills
4.3 Conclusions
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The development of internal labour markets and the role of vocational and
educational training
5.1 Assumptions and research questions
5.2 The case study results
5.2.1 The clothing industry: the key role of regional VET systems
5.2.2 Software development: the limits of self-employability
5.2.3 Research and development in IT: the learning organisation under
pressure?
5.2.4 The food sector: erosion of internal labour markets
5.2.5 IT in public administration: the technological-oriented or contextoriented pathway
5.2.6 Customer services in the public sector: divergence of internal labour
market structures
5.3 Conclusions
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General conclusions
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Bibliography
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1
Introduction
It is generally agreed that major upheavals are taking place in the organisation of work as
corporate structures are transformed in the context of economic globalisation and rapid
technological change. But how can these changes understood? And what are the impacts
on social institutions and on workers? The ‘Work organisation and restructuring in the
knowledge society (WORKS)’ project was funded by the European Commission in 2005
under its 6th Framework Programme to investigate these questions. With partners in seventeen different institutions in fourteen EU Member States, this ambitious research project
has combined theoretical work and a detailed analysis of a wide range of statistics with
in-depth case studies to analyse the forces that bring about these changes, including
global value chain restructuring and the policy environment.
One of the underlying assumptions of the WORKS project is that the reorganisation of
work can only be understood fully in the context of a global restructuring of value chains,
entailing a simultaneous decomposition and recomposition of sectors, organisations,
labour processes and skills. However, the considerable heterogeneity within Europe of
skill supply, levels of employment, welfare systems, and economic sectors makes it especially difficult to disentangle the causes and effects of such processes and to isolate the
primary drivers of change. Yet it is particularly important for Europe both to understand
the factors that will enable firms to sustain their competitive edge, to ensure a future supply of jobs that is satisfactory both quantitatively and quality and to examine the impact
of these changes on the quality of life. At the heart of this is a single issue: how are
employment practices adapting to change and with what effect? If we can answer this
more effectively on a Europe-wide basis we will be able to propose practical solutions to
real problems.
Starting in June 2005, the WORKS consortium, involving partners from seventeen different institutes across fourteen EU Member States, carried out an ambitious programme
of theoretical and empirical work. These were carried out under five main pillars: ‘theories and concepts’, ‘quantitative research’, ‘policy’, ‘qualitative research on organisations’
and ‘qualitative research on individuals’. The work of these pillars is summarised more
fully below.
This is one of eleven thematic reports that brings together the results of all five pillars
to deepen our insights into the topic of workers representation and participation in the
framework of industrial relations and social dialogue.
The other reports will focus on the topics of: value chain restructuring in Europe in a
global economy; strategies to reach flexibility in the organisation; skills and qualification
policies and HRM; new career trajectories and biographies; changing gender and ethnic
relations in the workplace; working time, gender and work-life balance; change processes
and future perspectives; changes in work in transitional economies; health, safety and the
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CHAPTER 1
quality of working life; and employers’ use of technology and the impact on organisational structure.
The material on which this report draws is summarised below.
1.1
Theories and concepts
In the first stage of its work the WORKS partners collectively carried out a review of the
very large body of literature with relevance to the project’s research questions, in order to
map the field, formulate hypotheses to be tested in the empirical work and develop a clear
conceptual framework for the research. This was no easy task. There are many lenses
through which one can view the restructuring of work in a global knowledge economy.
There are the lenses of different academic disciplines, for instance the sociology of work,
economic geography, organisational theory, social psychology, ethnography, gender
studies, industrial relations or political science. Then there are the lenses of different social
perspectives, for instance those of international development agencies, of national governments in developed and developing countries, of technology providers, of statisticians,
of employers, of trade unions, of educators, of civil society, of skilled professional workers
who are may be beneficiaries of change, and of those groups that are potential losers.
There are also differences deriving from different national research traditions, different
ideological approaches and many other variables. In each of these many fields, a body of
literature has grown up, trying to make sense of the changes taking place and supplying
fragments of evidence. Piecing all this evidence together was a major challenge. The very
disparity of the origins of this literature means that it is difficult to find a common frame
of reference. Even when the same terms are used, they may be used with different meanings and the lack of commonly-agreed definitions can make the refracted pieces of evidence difficult to compare, often giving them a contradictory and anecdotal character.
Nevertheless, in its first six months, the project managed to bring together in a single
report (Huws, 2006) a remarkably comprehensive overview of the available evidence,
thanks to the large collective efforts of the interdisciplinary WORKS team. This evidence
was carefully sifted with the aim of distilling insights that could help to produce a clear
conceptual framework in order to develop hypotheses and research questions to guide the
empirical research to be undertaken by the WORKS project. This programme of work
was, however, highly ambitious, encompassing the aims of: improving our understanding
of the major changes in work in the knowledge-based society, taking account both of
global forces and of the regional diversity within Europe; investigating the evolving division of labour within and between companies and the related changes at the workplace;
exploring the implications for the use of skills and knowledge, for flexibility and for the
quality of working life; and examining the impact on occupational identities; time use and
learning; as well as the impact on the social dialogue and the varieties of institutional
shaping. Balancing the need to take account of these many dimensions whilst still retaining a focus on clear research questions that could be addressed feasibly within a coherent
research design in a relatively short space of time was a major challenge, and we begin by
presenting the methodology that was adopted to achieve this.
The first task was to achieve a division of labour that on the one hand took full advantage of the specialist subject expertise of partners whilst also recognising the diversity of
national research traditions across Europe and the need to take account of the literature in
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INTRODUCTION
all major European languages. Once topics had been assigned to partners, in a second
stage, these partners were asked to produce a list of ‘key concepts’ for inclusion in a glossary.1 The purpose of the glossary was to ensure that all partners could share a common
understanding and make visible any differences of interpretation or definition of key
terms so that they could be discussed and agreed, in a process whereby, in its contribution
to the cohesion of the whole group, the dialogue involved in producing the entries was as
valuable as the end result. The next stage involved the production of draft reports covering the main concepts and the associated literature. Despite the authors’ broad knowledge
of their chosen topics, and the fact that each report included inputs from institutes in
more than one country, it was felt that the only way to ensure that each report covered the
full range of relevant European scholarship was to add a further, vital stage in the work.
This involved circulating each draft report as it was completed to all the other WORKS
partners, including those who had not been involved in the actual process of reportwriting. In this stage, partners were asked to draw on their knowledge of the literature in
their own language or national setting, as well as their specific subject knowledge, to
comment on the reports, point to issues that might be regarded as contentious and add
references to relevant sources. This process of peer review enriched and refined the report
which was then used by all partners as an input to the development of research questions,
methodologies and research instruments for the empirical research.
1.2
Quantitative research
The ‘quantitative research’ pillar of the WORKS project studied the changes in work in
Europe on the basis of comparative analyses of data from existing organisation and individual surveys. In a first step, major European organisation surveys and individual and
household surveys relevant for changes in work were mapped and benchmarked in order
to assess their relevance and their strengths and weaknesses for comparative analyses on
changes in work. Next, and more important for the thematic reports, the research focused
on the secondary analysis of the results of the organisation and individual/household
surveys. For the organisation surveys, a thematical analysis of thirteen major national and
international organisation surveys, focusing on the major results with respect to the key
issues of the WORKS project, resulted in an overview report ‘Comparative analysis of
organisation surveys in Europe’ (Ramioul & Huys, 2007). The key issues addressed in this
report are:
 new forms of work organisation, organisational and technological innovation, changes
in work. Here in particular some findings with respect to skill-biased organisational
change and the role of employee involvement and participation are relevant;
 changes in skills and qualification and vocational training policies at establishment
level;
 work-life balance and working time arrangements. Here conclusions from EU wide
research on working time arrangements and flexibility policies are of particular interest;
 quality of the working life as measured in organisation surveys.
1
Available online on http://www.worksproject.be/Glos_and_defint.htm.
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For each of these issues, the most relevant conclusions from the organisation surveys were
summarised, thus leading to a comprehensive overview of organisational changes in
Europe based on this particular data source.
For individual surveys, three major sources of individual and household data made it
possible to carry out longitudinal and EU comparative analysis on the issues relevant for
the WORKS project: the Community Labour Force Survey (CLFS); the European Working
Conditions Survey (EWCS) and the European Community Household Panel (ECHP).
Based on these three key data sources, four different reports were published, each focusing on the EU comparative analysis and on the identification of trends with respect to key
WORKS issues. The reports focused on the following issues:
 tracing employment in business functions: a sectoral and occupational approach: in this
report an innovative method was used to measure changes in employment related to
value chain restructuring (Geurts, Coppin & Ramioul, 2007);
 trends in work organisation and working conditions. For this report, three waves of the
EWCS were analysed in a longitudinal and EU comparative perspective, shedding light
on changes in task complexity, autonomy, working time independency, health and
safety issues and working conditions (Greenan, Kalugina & Walkowiak, 2007);
 work flexibility in Europe: a sectoral and occupational description of trends in workhours, part-time work, temporary work, and self-employment was carried out based on
the CLFS (Birindelli & Rustichelli, 2007);
 occupational change in Europe: based on longitudinal data, aspects of work satisfaction, occupational mobility and overqualification were investigated (Brynin & Longhi,
2007).
1.3
Qualitative research on organisations
The organisational case studies within the WORKS project covered a number of generic
business functions that represent a wide variety of activities and labour processes in the
‘knowledge society’ ranging from highly-skilled ‘knowledge work’ to semi-skilled manual tasks. The research also aimed to focus on those business functions that feature
prominently in the external restructuring of companies and thus in the restructuring of
global value chains. The selected business functions were: research and development;
production; logistics; customer service; and information technology.
To study the restructuring of value chains these business functions need to be located
in specific sectors. The selection of sectors reflected the emergence of global value chains
in different historical stages: sectors where vertical disintegration and internationalisation
is already a rather old fact, and sectors where these have developed only very recently.
The sectors under study were:
The clothing industry is an example of an ‘old’ industry where restructuring of global
commodity chains was already an issue in the 1970s. Recently, the integration of Central
and Eastern Europe in pan-European production networks and the phasing out of the
Multi-Fibre Arrangement and the WTO Agreement on Textiles and Clothing considerably
changed the trade regimes and resulted in a new wave of restructuring mainly affecting
production in Southern Europe and the CEE countries. This sector also provides interesting examples of ‘head and tail’ companies which concentrate high-skilled work within
Europe but carry out the rest elsewhere.
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INTRODUCTION
The food industry is the largest manufacturing sector in terms of employment in the EU.
It was subject to major restructuring after the completion of the single market in the
European Union in the early 1990s which allowed companies to replace their country-bycountry organisation with a pan-European structure. In contrast with parts of the clothing
industry, food production is by and large highly-automated. Both industries are interesting as examples of buyer-centred value chains in which the demands of the retail trade
play a pivotal role.
The IT industry is a growing industry that saw a major wave of restructuring during
and after the boom years in the late 1990s and around 2000, partly associated with offshoring. Internationally, this has contributed to the emergence of a ‘new breed of TNCs’,
global companies that supply services to other companies. To a large extent the IT service
provider companies have grown through large outsourcing contracts that include the
transfer of personnel from their public or private sector client organisations, a tendency
highly relevant for the research questions of WORKS.
Public sector organisations and services of general interest are currently subject to farreaching restructuring because of liberalisation and privatisation policies and budgetary
constraints. In these sectors the lengthening of value chains through large scale outsourcing is a very recent phenomenon. The consequences for the quality of work are highlyinfluenced by traditional differences in the regulation of work between the public and
private sectors.
Each business function located in a particular sector was studied in a range of countries
with diverse employment and welfare regimes (liberal, conservative, socio-democratic
etc.). This made it possible to analyse the influence of institutional frameworks on the consequences of restructuring. Overall, 58 case studies were conducted in fourteen countries.
The following overview shows the distribution of case studies.
Table 1.1
Sample of case studies
Customer
service
IT
Public sector
administration
AT; BE; BG;
HU; IT; UK;
SW
BE; NL; UK;
FR; DE; NO;
SW; PT
Services of general
interest: post and rail
DE; AT; SW;
NL; GR
Textiles/clothing
R&D design
Production
Logistics
BE; FR; DE;
PT; IT
BE; IT; PT;
HU; GR
FR; DE; NL;
PT; HU
GR; BG; IT;
NO; DK; UK
BE; NO; BG;
GR; UK
Food
IT
DE; AT; UK;
BE; FR; NO
DE; AT; HU;
BG; SW
For each case study, eight to ten interviews with management, key employees, and shop
stewards (in the selected business functions) were conducted. The interviews were complemented by company documents and other material that made it possible to produce a
comprehensive picture. Researchers in the respective countries synthesised the individual
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case studies from the interview data. On the basis of the individual case study reports,
comprehensive comparative analyses were carried out to compose this report. The
authors of the report are deeply indebted to the researchers who carried out the case
studies in the various countries and to the respondents who devoted their time to our
research and helped us to understand the developments in their companies and sectors.
For the presentation in this report, all company names have been changed to assure anonymity.
1.4
Qualitative research on individuals
The organisational case studies were complemented by case studies designed to investigate the impacts of changes at work on individuals and their households. Thirty of these
occupational case studies were achieved in fourteen countries, between June 2006 and
May 2007; in total 246 in-depth individual interviews were carried out, according to
common interview guidelines elaborated in May 2006.
These occupational case studies are closely related to the organisational case studies
that were carried out in a selected number of business functions, during the same time
span. In the WORKS project, the concept of the ‘business function’ lies at the core of the
qualitative empirical research, since these business functions provide the most useful unit
of analysis for studying value chain restructuring and changes in work. In order to study
changes in work at the individual level, individual workers were selected within specific
occupational groups linked to key business functions.
Six occupational groups were selected: designers in the clothing industry; researchers
in information and communication technology; IT professionals in software services; production workers in food or clothing; logistics workers in food or clothing; front office
employees in customer relationships in public services. In each occupational group, three
to seven case studies were conducted in different countries, covering a variety of socioeconomic and institutional contexts. Each case study relied on seven to nine in-depth
individual interviews, including a biographical dimension.
The analysis of the interviews was structured around five themes that grouped together the WORKS research questions. These were: career trajectory, occupational identity, quality of work, knowledge and learning, and work-life balance.
Particular attention was paid to gender issues. Gender was treated as a transversal
theme in the analysis of changes in work at the individual level. The principle of gender
mainstreaming (i.e. taking systematically into account the differentiated experiences of
men and women in all items of data collection and analysis), formed one of the basic
guidelines for the individual interviews.
1.5
The policy pillar
A central task in WORKS is to examine what effect policy initiatives and regulation at
various levels - international, European, national, regional, sectoral and company - actually have on work life and work experience. Especially relevant in this regard is the role of
institutions in the determination, implementation and enforcement of policy. We began
with the question: Can we expect divergences in the ability to regulate changes in work
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INTRODUCTION
due to restructuring according to different types of production or employment regimes,
different types of industrial relations models, diverse institutional frameworks? Toward
this end, all of the organisational case studies included a section on industrial relations
and regulation of work. Within each company that was investigated, data was collected
on the forms that worker representation took, which issues were negotiated, the role of
workplace representation in restructuring (information, consultation, active intervention),
the impact of European or national regulations, and the pressures on regulations and
institutions due to restructuring. Additional interviews with trade union representatives
and works councillors were carried out where possible.
The research agenda motivating this line of inquiry was to examine what role the
institutions and actors of industrial relations play in restructuring across value chain in
diverse settings and across diverse institutional contexts. A further issue is what role
workers’ representatives have in tempering the effects at the workplace that result from
this restructuring, including the terms and conditions of employment, fragmentation and
segmentation, gender equality, training and skilling, and quality of work life. Existing
studies have shown that there are major challenges for existing institutions and forms of
social dialogue to deal with current trends in restructuring and changes at work. Therefore, the case studies also investigated the impact of restructuring on the strategies or
effectiveness of workers’ representation and workers’ voice.
1.6
Introduction to this report
In this report, the focus is on the role of knowledge in the restructuring of value chains,
the implications for the work organisation and for the use of knowledge, the impact on
required skills and the responses of personnel management to the organisations in restructuring.
The overall research focus of WORKS is also the key perspective for the analysis of the
report at hand. The growing importance and impact of corporate strategies such as outsourcing, subcontracting, interfirm collaboration, relocation, eWork etc. result in increasing complex organisational configurations, in production and labour processes that
stretch beyond the organisation’s boundaries, and in deep transformations of the work
organisation. Furthermore, this growing complexity of corporate structures seems to be
highly dynamic: in the increased global interconnectedness of firms, economies and
regions, the speed with which organisations are under restructuring, jobs are outsourced
and activities are moved abroad, seems to indicate that organisations are becoming more
contingent than before. The effect of the growing complexity and dynamics of organisations, production processes and labour processes for skill requirements will be dealt with
in four different sections:
 the role of knowledge in value chain restructuring;
 the impact of this restructuring on the use and management of knowledge in the
organisation;
 the impact on required skills of the employees involved;
 the effects on internal labour markets and the role of vocational and educational training (VET) systems.
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After clarifying the research questions, the various empirical data that result from the
WORKS project will be used to provide answers. Due to the nature of the topics dealt
with in this specific report, the organisational and occupational case studies will form the
major basis of this analysis. A bibliographical list of the organisational and occupational
case study reports that provide the empirical data for the analysis is included in the bibliography. Further, the authors made gratefully use of the comparative analysis report produced on the basis of organisational case studies written by Flecker, Holtgrewe,
Schönauer, Dunkel and Meil (2008) and of the comparative analysis report produced on
the basis of occupational case studies written by Valenduc, Vendramin, Krings and
Nierling (2008).
The key concepts used in the report are the definitions developed by Cedefop (2004):
 the term ‘skill’ stands for the knowledge and experience needed to perform a specific
task or job. ‘Skill’ is an umbrella term which encompasses competences, knowledge and
qualifications;
 ‘competence’ is the ability to apply knowledge, know-how and skills in an habitual or
changing situation;
 ‘qualification’ is understood as an official record (certificate, diploma) of achievement
which recognises successful completion of education or training, or satisfactory performance in a test or examination. Award of a qualification usually signifies satisfaction
of requirements for an individual to enter or progress within an occupation;
 ‘knowledge’ means the outcome of the assimilation of information through learning.
Knowledge is the body of facts, principles, theories and practices that is related to a
field of work or study. Knowledge could be theoretical, factual or practical.
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2
The role of knowledge in the restructuring of
global value chains
2.1
Assumptions and research questions
2.1.1
Value chain restructuring
Value chain restructuring as it is investigated in the WORKS project focuses on changes in
the company structure, more precisely the changing organisational configuration of business functions and the changing relationships between business functions at the level of
the value chain. The aggregate of business functions of an organisation, which includes
not only the core production activities but all supportive activities that are necessary to
realise its objectives (i.e. the production of goods or services), can be perceived as the outcome of the corporate decisions with respect to the structure and the division of labour of
its production process. A specific business function, for instance research and development or production, can be consolidated in one organisation, while in another it can be
fully or partially spread over different units or different sites. Organisations not only
decide on this functional structure of the production process but also on the location (in
case of multiple sites) and on the economic governance of business functions (what
activities will be contracted out and what will be kept in house). As a result, organisations
considerably vary in the way their activities are functionally clustered into business functions and most organisations combine different forms of economic governance: innovation projects are set up in joint ventures, standardised parts of the production activities
are delocalised to subsidiaries in low-wage countries, the maintenance of the premises is
subcontracted to a specialised cleaning firm, the marketing and customer relations are
outsourced to a call centre, the website is developed by a small freelancers’ company
while the ICT infrastructure is managed by a big business service supplier. The decisions
on clustering and fragmentation of activities and the decisions on their location and on
their economic governance are related to the corporate strategies aiming at the maximalisation of productivity, economic performance and product and process innovation.
Our research focuses on processes of restructuring understood as changes in the bundles of activities that firms organise internally. The focus is not on existing long-term or
short-term (trade) relationships that the firm has with other organisations for activities
that they have never organised in house, for which they do not possess the capabilities
and resources or for which they depend for any other reason on the collaboration with
other organisations. Rather, the focus is on the role of knowledge in the process of restructuring of value chains and changes in the organisation, location and governance of
business functions. In this, the prime levels of analysis are the global value chains of the
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CHAPTER 2
industries under investigation and the different business functions as they are organised
in the companies composing the chain. In the next section, the analysis will turn to the
work organisation, labour process and tasks of the business functions under restructuring.
In this first section, the focus is on the question how knowledge plays a role in the restructuring of business functions along the value chain. When fundamental changes occur
in the organisation’s functional architecture, the configuration of business functions that
are actually performed in house, knowledge can be a decisive factor. In the historical
process of division of labour, knowledge and knowledge codification have been identified
as key drivers. When we understand value chain restructuring as a change in the division
of labour at the level of the production process, we can assume that knowledge plays an
essential role too. Also in different economic theories including the resource-based management theories, evolutionary economics, economics of innovation and theories on the
learning organisation, knowledge is viewed to be a critical factor in the ‘raison d’être, definition, functioning and performance of firms’ (Amin & Cohendet, 2004: 1).
2.1.2
Theories on knowledge and knowledge codification
In modern economic and management theories, the conceptualisation of knowledge and
its role in the organisation have been highly-debated, particularly in the context of the
emergence of the knowledge-based society and the debates on the related science and
technology policies. In mainstream economic theories knowledge has long been regarded
as akin to information and the production of knowledge was a question of reducing
uncodified knowledge into information. In these theories, firms are regarded as information-processing entities of which a prime objective is to increase the stock of codified
knowledge and to leave as little knowledge as possible uncodified (Amin & Cohendet,
2004: 17ff). Contrasting strands of economic theories, however, repudiate this rationalist
view and claim that ‘the knower cannot be separated from the known’ (Ancori, Bureth &
Cohendet, 2000: 263). Knowledge formation, circulation and exchange are bound to and
determined by the social interaction and the communication process between the agents
involved. These scholars proclaim that knowledge is more than information and has a
social, interactive and contextualised character (Amin & Cohendet, 2004: 17-35). Knowledge production and circulation occur in an organised context, be it in the firm as a whole
or in smaller ‘communities’ within the organisation or even at the level of regions.
Central in the knowledge debates, and of importance for the focus of the report at
hand, is the issue of knowledge codification. In view of the economics of knowledge management, economists have an interest in better understanding to what extent and under
what conditions potentially codifiable knowledge can be codified (Cohendet & Steinmueller, 2000: 202-203). In the rationalist theories, the conditions under which knowledge
can be codified basically boil down to economic incentives and cost-benefit considerations
(Cowan, David & Foray, 2000) and, hence, the expectations for codification are rather
optimistic. In the theories that stress the contextualised and social character of knowledge
formation, the circulation of uncodified or tacit knowledge through social interaction in,
for instance, communities of practice, is acknowledged. In other theoretical approaches
such as the labour process theories, knowledge codification plays a key role in understanding managerial strategies and practices leading to the historical process of the division of labour. Here, the codification of the skills and knowledge of employees are per-
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THE ROLE OF KNOWLEDGE
ceived as core strategies of capital because codification facilitates the commodification of
labour and, in this capacity, supports to discipline labour in the context of the employment relationship and the indeterminate character of the labour contract. This is one of the
central theses of the Braverman debate. In these theories, knowledge codification is placed
at the centre of the power relations between capital and labour.
Much of the codification debates, however, are about how to understand the realm of
tacit knowledge. Starting from the aphorism ‘we know more than we can tell’ (Polanyi,
1967: 4), the literature on tacit knowledge seems to have reached a relative consensus. As
summarised by Gertler (2003), tacit knowledge first refers to ‘subsidiary awareness’, as
contrasted to focused awareness. Subsidiary awareness is based on the observation that
successful performance depends on ‘the observance of a set of rules which are not known
to the person following them’ (Polanyi, 1958: 49, cited in Gertler, 2003: 77). Subsidiary
awareness is related to successful performance even to the extent that, should the performer turn his or her awareness to this tacit knowledge, the quality of the performance
would drop: ‘performance is paralysed if we focus on the details’ (Ancori et al., 2000: 272).
The second aspect of tacitness refers to the communication difficulties and the language
inadequacies in expressing certain forms of knowledge (ibid.: 77), in other words, not
finding the right words to explain what one is doing how and why. The implication of
these two characteristics is that tacit knowledge cannot be simply transmitted like information (as coded knowledge). Tacit knowledge is transferred through demonstration
instead of explanation and it is acquired through practice and experience, based on imitation, trial and error and repetition. And it is exchanged in social interaction rather than via
books or other storage media.
As a consequence of the nature of tacit knowledge, characterised by subsidiary awareness and non-verbal expression, codification bears the risk of curtailing it. This insight
implies that it is generally acknowledged that not all knowledge can in the end be codified and that codified knowledge cannot be regarded as a substitute for tacit knowledge.
Rather codified and tacit knowledge are considered as being closely interrelated, be it
because all codified knowledge requires tacit knowledge to be useful (Ancori et al., 2000:
281). This can be illustrated by the problem of mastering a language: in order to speak a
language fluently, it is not sufficient to know the words and the grammar, one also needs
a considerable amount of practice and develop a linguistic feeling. Further, as Ancori et al.
argue, the production of codified knowledge implies the production of new forms of tacit
knowledge and vice versa (2000: 282). Also Huws shows how the processes of knowledge
codification and knowledge creation are closely interrelated (Huws, 2006: 26). In their
article with the inspiring title ‘Why all this fuss about codified and tacit knowledge?’
Johnson, Lorenz and Lundvall (2002) proclaim that, rather than speaking about substitution or complementarities, in each knowledge there is a tacit dimension: ‘it is exceptional
for human or organizational competencies to be fully transformed into codes but, at the
same time, it is always possible to transform aspects of them into codes’ (Johnson et al.,
2002: 253). The authors suggest to divide knowledge into ‘know what’ (facts, information,
data), ‘know why’ (algorithms, laws in nature, causalities), ‘know how’ (theoretical and
practical abilities, skills) and ‘know who’ (personal networks and collaborative and communicating abilities). The degree of codifiability, a priori the tacit dimension, of each type
radically differs. Know what and know why are relatively easy to codify (although here
too aspects will remain uncodifiable), but know-how (skills and especially practical abili-
15
CHAPTER 2
ties) and especially know who much less so. Know-how can to a certain extent be codified
but since (practical) skills are mostly acquired during interaction with experienced tutors
and while practicing, codifiability inevitably remains limited (Johnson et al., 2002: 252ff).
As a result, codification of know-how (skills) entails a risk of loss of competences during
the transformation process. Know who, including both personal networks and the abilities for social interaction with them, is intrinsically highly context specific and often individualistic, which also limits its codifiability. In conclusion, these insights about the tacit
dimension in the different types of knowledge support the existence of collective, processand context specific characteristics of knowledge and of knowledge formation. As a consequence, the efforts and the conditions for success of what bodies of knowledge can - and
will - be codified, are far more complex than just a matter of economic incentives and costbenefit considerations.
2.1.3
Knowledge codification and managerial strategies
Because of the ‘the localized, non-ubiquitous, context-specific nature of tacit knowledge’
(Gertler, 2003: 81), the question should now be raised what are the implications of this
complexity for organisations. More precisely, how should firms take into account the tacit
dimension in restructuring processes that imply a spatial division of labour? To what
extent the knowledge to carry out the activities related to business functions, should be
codified or not before they can be reorganised spatially and/or contractually? Some
sociologic, economic and geographical scholars explicitly point at the role of complexity
and codification in value chain co-ordination. Gereffi, Humphrey and Sturgeon (2005)
argue that knowledge related to economic transactions is a key factor in the modus of
economic governance of global value chains. The authors state that the complexity of the
transactions (and the related co-ordination requirements) and the ability to codify knowledge, next to the capabilities of suppliers, explain the way business functions are governed: in market relations, in bureaucratic hierarchies or in the other modes of economic
governance situated in between these two poles (Gereffi et al., 2005: 85ff). Those bodies of
knowledge that can be difficult to codify will rather be governed in bureaucratic or relational modes, rather than in market relations. Faust, Voskamp and Wittke (2004) conclude
from their research that value chains are fragmenting ‘at those points where knowledge is
most explicit and codified’. The key issue here is the spatialities’ of knowledge, the stickiness of tacit knowledge and how management practices deal with these aspects in restructuring processes.
The complexity of knowledge, and especially of its tacit dimension, may have several
implications for the restructuring of labour processes. First, the localised and contextspecific nature of the tacit dimension of each type of knowledge entails that ‘tacit knowledge does not travel easily’ (Gertler, 2003: 84) and hence this tacit dimension will limit the
outsourcing and spatial relocation of activities. A quote of a manager interviewed in the
frame of the WORKS case studies, may be illustrative at this point: ‘for simple work we
move the jobs, for complex work we move the people’ (De Bruyn & Ramioul, 2007b: 8).
Indeed, we can assume that activities that are codified or codifiable, are more likely to be
externalised, while those activities that rely to an important extent on tacit knowledge will
be more likely to be kept in house (and perhaps rather cause mobility of people who possess this knowledge). This is in line with the conclusions of Faust et al. on value chain
16
THE ROLE OF KNOWLEDGE
restructuring and of Gereffi et al. that the ability to codify knowledge will determine the
form of economic governance. Hence, the first hypothesis is that those activities and business functions will primarily be restructured, whether contractually (outsourced) or spatially (relocated) or in a combination of both, of which the knowledge is or can more easily
be codified.
Secondly and related to this, we assume that firms engaging in the outsourcing or relocation of activities, will undertake efforts to codify as much of the knowledge as possible
in view of this restructuring. In preparation of the restructuring, they will have to analyse
and document the different activities, the work processes, the different tasks of the
employees involved, the actual procedures they follow, the decisions they make in the
course of their work, etc. In other words, a decision to reorganise activities will initiate a
codification process of the knowledge needed to carry out these activities. Similar codification processes will be initiated in preparation of the automation of work and the introduction of new technologies. Gertler defines such a codification process as the identification and appropriation by the management of the shop floor knowledge and asserts that
this is the ‘original’ tacit knowledge problem, which is as old as capitalism itself: ‘[the
problem of] … bridging the gap between conception and execution and building recursive
loops to allow tacit knowledge acquired during execution by shop floor workers to feed
back to conception by engineers, designers and managers’ (Gertler, 2003: 82). As the history of the international division of labour shows, the codification of labour process
knowledge resulting in Taylorist organisations has highly-facilitated the geographical
relocation of standardised and routine work, such as manufacturing. However, because of
the contextual and social character of knowledge, the codification process initiated in
view of restructuring and relocation will inherently be limited, in particular for some
types of knowledge such as know-how and know who, where the tacit dimension is
important. This bears the risk that part of the knowledge required for the production
process will not be shifted and the knowledge transfer in the context of externalisation of
activities will be incomplete. This might result in less smooth execution of the relocated
work or in failed restructuring events. Or it might require some transition periods involving learning and building up a minimal level of experience for the employees at the
destination. To illustrate the limits of codification, Johnson et al. (2002: 256) point at the
‘numerous failures of codification projects’ initiated in the context of comprehensive
knowledge management projects. Apart from the underestimation of the time and costs
for codification operations, Johnson et al also stress that parts of the knowledge might get
lost during the codification process. Elsewhere, we have illustrated with case studies from
the EMERGENCE project that the uncompleted codification of knowledge in restructuring processes and the underestimation of tacit knowledge may be important elements for
explaining the success or failure of outsourcing and offshoring processes (De Jonckheere,
Ramioul & Van Hootegem, 2003; Ramioul, 2004 & 2008). Hence, the second hypothesis is
that in codification processes initiated in the context of restructuring, there is a risk of a
loss of knowledge and a (temporary or permanent) decrease in performance related to the
incomplete knowledge required for smooth operations.
Finally, it is likely that the management will take specific measures for the tacit, uncodified or uncodifiable bodies of knowledge in order to secure their availability to the company. Since social interaction is of crucial importance for the acquisition, use, circulation
and development of uncodified knowledge, proximity of the agents involved seems of
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CHAPTER 2
crucial importance. Hence, firms may have to invest in establishing proximity, especially
in a context of spatially dispersed activities. Different authors suggest that organisational
and relational proximity are more important than geographical proximity in supporting
the production, identification, appropriation and flow of tacit knowledge (Amin &
Cohendet, 2004: 108-110; Gertler, 2003: 83). An interesting concept introduced by Von
Hippel (1994, 1998) is ‘stickiness’’ for information that is costly to acquire, transfer and
use.2 Stickiness can refer to the tacit dimension of knowledge, but also to the (too vast)
amount of information that has to be transferred or to the requirement of investments in
skills necessary to use the information (Von Hippel, 1994: 430-431). The author illustrates
how in innovation-related problem solving, the most (cost-)effective solution would therefore not necessarily be to invest in the ‘unsticking’ or reducing the stickiness of information, but rather to look for other solutions, such as mobility. When considering the issue of
knowledge uncodifiability in restructuring processes, we assume that firms will deploy
different strategies in order to secure the availability or proximity of (the possessor of)
uncodified knowledge in the labour process. Such strategies may include the requirement
for mobility of the employees, setting in place specific co-ordination functions to secure a
comprehensive communication over distance between the different activities, developing
recruitment strategies and/or the setting up of exchange of knowledge and work practices or joint training sessions with the employees of both the source and the destination
companies.
In conclusion, the overall research question how knowledge plays a role in value chain
restructuring has now been unravelled, leading to different hypotheses in which the tacit
dimension of knowledge and knowledge codification, and how the management deals
with these, are central: the greater likeliness of externalisation of the codified parts of
activities, the limitations and risks of codification processes initiated in restructuring
cases, and the managerial strategies to deal with those dimensions of knowledge that cannot be codified and transferred. The empirical findings of the WORKS case studies in
relation to these hypotheses can now be investigated.
2.2
The case study results
In this first section dealing with the empirical data from the WORKS project, the different
restructuring trends of the investigated sectors and activities are presented by way of
introduction and background before addressing the different hypotheses.
2.2.1
The clothing industry: integration and fragmentation
The clothing industry is a sector where the global relocation of production activities to
low-wage countries has resulted in globalised value chains already since the early ‘70s of
the past century. The analysis of the employment evolutions of the clothing sector in the
EU since the nineties, as investigated in the WORKS quantitative studies on changes in
2
Stickyness of a given unit of information in a given instance is defined as ‘the incremental expenditure
required to transfer that unit of information to a specified locus in a form that is usable by a given information seeker’ (Von Hippel, 1994: 430).
18
THE ROLE OF KNOWLEDGE
work, shows that the huge employment decline in this sector has been accompanied by a
considerable reduction in the share of core production workers within the sector: this
share dropped from 67 to 60 per cent in the old member states between 1999 and 2004. At
the same time a growing importance in terms of employment of activities previously
regarded as supporting activities is recorded. Most prominent in this respect is the evolution of employment in R&D. This is the only occupational group in Textile and Clothing
that has been able to maintain its absolute employment level during the past decade.
Design is closely linked to the end products in textile and clothing industry. On the basis
of these trends, it can be concluded that European firms keep this core activity in house,
while other activities are being outsourced or relocated elsewhere in the world (Geurts et
al., 2007).
Despite the historical relocation of mass production activities in clothing, it is interesting to see how these value chains are evolving ever since. The established global character
of the clothing industry and, in particular, the gradually disappearing of mass production
activities in the old Member States, implied that the case studies involved in the research
have mostly been carried out in ‘higher end’ firms of the value chain: companies whose
main activities are, on the one hand, the design of new collections or, on the other hand,
the distribution to retail. Nevertheless, all of the cases are still undergoing deep restructurings. Interestingly, these restructurings can often be described in terms of integration
of activities rather than further fragmentation along the value chain alone. Such integration occurs under different forms, depending on the history, structure, position in the
value chain and size of the company. Integration can be ‘forward’ when firms include
activities that lie downstream the value chain. This is typically the case of the so-called
branded producers that set up their own retail chain networks. Another form of forward
integration is the strengthening by manufacturers of the logistics in view of controlling
the value chain as a response to the growing power of the retailers. A good illustration of
this trend can be found in the Italian clothing company Green Spa, a large producer of
high-end luxury clothing (Pedaci, 2007a, b & c). This company externalised all the manufacturing activities both to own subsidiaries (relocation) as to third companies (outsourcing). Even the low-end design and collection development as well as the prototyping production is outsourced, while only the high-end design is kept in house. The logistics function, on the other hand, is also kept in house for strategic reasons and in addition the
company sets up an own sales network in view of controlling the customer-related part of
the value chain. Also other companies in the research sample, such as the German
Menswearco, focus their activities on the design, logistics and marketing, while manufacturing and sales are ‘internationalised’ (Bechmann, Krings & Nierling, 2007). Thanks to
this strategy and the key role of logistics, Menswearco controls the full chain from the
supply of fabrics to the network of retailers.
In several companies it became clear that logistics has become a strategic business
function in the development of the clothing value chains. There are also retailers that integrate the logistics function backwardly (upstream the value chain), while other clothing
companies, situated in the middle of the value chain (warehouses, wholesalers) realise
both backward and forward integration by offering intermediate services to retailers, such
as the search for cheap production facilities, material sourcing, or the technical support of
the value chain control by implementing and managing ERP systems. An interesting
example here is the Portuguese company WW-DK (Woll, Vasconcelos da Silva & Moniz,
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CHAPTER 2
2007b): originally a wholesale company providing garments to retailers, this company
never had own manufacturing capacities. Gradually, the services offered have been
enlarged in order to obtain a central position in the value chain: consulting, research,
design, sample development, sourcing of materials, production sourcing, lab testing, fitting, quality control and tracking: all these activities can now be supplied by WW-DK.
Neither forward nor backward integration however, prevent the companies investigated to further outsource or relocate remaining mass production activities and even (the
simpler) design activities, for instance to other firms or to freelance designers. This means
that integration of some activities goes hand in hand with the further externalisation of
other activities. Such externalisations often result in a strengthening of the remaining
business functions that are kept in-house: for instance in the Belgian producer of luxury
underwear Wonderwear where remaining production workers were conversed into prototype stitching to support the design units, focusing on the most complex production
tasks or on quality control (De Bruyn & Ramioul, 2007a). In general, such a strategy is
denoted as moving up the value chain.
The further fragmentation of the value chain caused by persevered externalisation of
some activities is not necessarily accompanied by a fragmentation of the value chain management or information flows. Both the insourcing of adjacent activities along the chain
and the introduction of ERP systems and other ICT infrastructures contribute to management’s attempts to ‘closing the loop’ from sales to design. The integration of the information flows, with the help of powerful ICT applications such as ERP systems, becomes a
key strategic issue in an economic context of broadened product varieties, shortened
product innovation cycles (from a two seasons cycle to sometimes monthly or continuous
renewal of collections) and a highly speeded-up time to market from design to sales.
These market-related drivers put extremely high pressure on both the design and the
logistics (and, of course, on the manufacturers downstream the chain).
In this respect, the evolution towards the so-called ‘head-and-tail-company’ should be
qualified. In this model, firms are assumed to concentrate on activities related to research
and development of new products and services, the technical design and prototyping on
the one hand, and the fine-tuning with the customer at the end of the product development on the other, while they outsource all activities ‘in the middle’. The case studies,
however, show that next to design and customer relations/retail, logistics and value chain
control have become core businesses too.
It can be concluded that in the clothing case studies of WORKS a strategy of value
chain fragmentation at the most codified, standardised points of the process can be discerned, particularly concerning the production activities. However, the case studies also
show that this strategy is limited because the ‘loop’ is broken as a result of the externalisation of all production activities. Production firms report a loss of craftsmanship and of
knowledge on the whole production process of designing and producing a garment,
because ‘knowledge is fragmented too’. Opportunities for knowledge exchange between
departments may diminish as design, sampling and manufacturing are organised at a
distance and no longer interact systematically with each other. An illustration of this is
found in the Hungarian company Copy Fashion, a previously state-owned Hungarian
company working as a subcontractor for a German firm to do cutting and stitching. The
German outsourcing company underwent a comprehensive restructuring including a
centralisation of the warehouses, reduction of the number of brands, outsourcing of the
20
THE ROLE OF KNOWLEDGE
logistics and further outsourcing of all remaining manufacturing activities. The complete
stop of all production activities in the German company and its strategy to become exclusively a marketing firm, was experienced as problematic by Copy Fashion: it seemed very
hard to communicate effectively on the production process and product quality since
there was a total loss of tailor knowledge at the German firm (Makó, Illéssy & Csizmadia,
2007a & b). This case shows indeed that fragmentation of labour processes may imply the
fragmentation and a loss of knowledge. Integration versus fragmentation of activities
along the value chain may have considerable implications for the integration versus fragmentation of the different forms of knowledge necessary for a smooth production process.
At the same time, processes of internalisation of activities such as logistics or retail
might indicate the importance of integrating the knowledge of these business functions. It
cannot be concluded from the case studies that such internalisation is established primarily in order to secure the disposal of uncodified knowledge or to secure proximity of
employees coming from different business functions. In this case, this internalisation of
activities is crucial for the ‘codified’ knowledge too. Since the objective seems to be to
increase control over the value chain and to establish feedback loops between design and
sales, the key role of information technology systems (such as ERP systems and collection
databases) confirms that it is a strategic objective of companies to circulate codified
knowledge.
In conclusion, we might generally describe the long-term evolution of the investigated
clothing companies by a shift in core business from production to design and to marketing, sales and retail and by a growing importance of logistics, not only of product flows
but also of information flows, as a strategic business function. However, fragmentation of
the value chain may also bear the risk of a loss of knowledge on the integral production
process and on the core production function.
2.2.2
Software development: focus on the international division of labour
The developments in the software sector can best be described by a growing internationalisation of the value chain, effected by a growth in mergers and acquisition accompanied
by an increase in the offshoring and outsourcing of jobs to countries where both the
resources (in terms of skilled labour reserve) and favourable trading conditions have
facilitated relocation (such as in the New Member States and the Far East). The cases
investigated include as well large, integrated multinational firms, regional subsidiaries of
these as well as former national companies that have been taken over by big players and
thus experience a shift from a national ‘embeddedness’ to the global operating scale of
their new mother company.
Despite the different histories of the firms investigated, a persevering internationalisation of the division of labour, and an increasing international competition as a consequence, is what they seem to have in common. The top-down integrated TNCs apply
strategies of global sourcing and ‘mix and match’ the available capacities from different
countries and companies, both inside and outside their own group, to combine them to
assemble the end product for the final customer (see also Ramioul & Huws, accepted).
The allocation of the work is mainly based on costs, market access and skill availability.
Internal tendering is used as the main principle for organising this. The regional sites that
are confronted with such competition mechanisms need to focus on moving up the value
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CHAPTER 2
chain and on developing and preserving a specific knowledge base in order to safeguard
their position, while outsourcing in turn the less knowledge-intensive tasks downstream
the chain. The firms at the end of the value chain can but bet on staying cost-competitive
and flexible. Such a division of labour in the value chain implies that the more simple and
standardised activities in software production (module programming, maintenance,
quality control) are relocated more downstream while R&D and customer contacts remain
concentrated in the main firm. The relocation of the more standardised activities obviously implies that there is a proportionate growing importance of more complex tasks
such as software architecture, software integration, customisation and end programming
in the source companies.
One key aspect of the value chain restructurings in this sector in terms of impact on
knowledge distribution is with no doubt the mechanism of internal tendering that is used
in most companies investigated. On the one hand, the knowledge and capacities for software production are distributed and available at different points in the chain which
implies that sites are competing for getting the new project. On the other hand, it seems
that the knowledge of different sites also has to be combined in order to realise a software
development project and that collaboration is necessary. Hence, value chain restructuring
in this sector might imply growing knowledge interdependency between different sites.
The firms ‘in the middle’ of the value chain, seem to be operating on the edge of moving up or sliding down the value chain. A specific expertise and the necessity to collaborate with other teams might mitigate the fierce competition, but the pressure to remain
competitive by offering unique assets forces them to re-think strategically what organisational solutions and working procedures offer the best conditions for further developing
and selling their particular expertise, as we will demonstrate further. The Hungarian
Domain soft is a good illustration for this delicate position in the middle: belonging to an
Austrian subsidiary of a large German electrical engineering company, its initial main
asset was the lower salary-cost. However, the growing offshoring of activities of the Austrian companies to locations more far away (hence cheaper and closer to the customer)
puts Domain soft under high pressure: they can no longer compete internally when projects are mainly assigned on a cost basis and they have on the contrary to move upwards
to more core development activities, while outsourcing in turn the more routine tasks to
cheaper locations in order to remain cost-competitive as well (Makó et al., 2007a).
Interestingly, for each of these positions in the value chain of software development,
different forms of economic co-ordination of the organisations involved can be found in
the case studies: hierarchical relationships (mother company-subsidiaries), market relationships (internal and external tendering on the global market), long-term collaborations
(for instance with specific customers), ad hoc assignments (e.g. in view of using spare
production capacities in cases of peak demand). The German Business-software, for
instance, is a large integrated TNC that grew ‘organically’ by establishing own subsidiaries in more than fifty countries worldwide. The firm is evolving towards a network
structure implying that the operations are reorganised over the sites according to business
functions (instead of product groups before) allowing the sites to pool specific competences. Projects are assigned to locations through internal tender procedures (Krings,
Bechmann & Nierling, 2007a). Softserv, contrarily, is a Bulgarian start-up provider specialising in high-value outsourcing for large customers. It evolved towards a customercentred structure in view of building up long-term relationships and knowledge-building
22
THE ROLE OF KNOWLEDGE
with their clients. In turn they offshore some of their activities to South-east Asia (Galev,
2007). Messenger & Digit, finally, are two companies (Austrian and Croatian) owned by a
large US corporation. The Austrian Messenger is specialised in software for financial services and has the exclusive use of the Croatian Digit’s capacities for the more routinised
parts of the software development and for software testing. This way, Digit Croatia provides additional capacity for Messenger when necessary (Flecker & Schönauer, 2007).
Two other developments, not necessarily directly caused by the restructuring but nevertheless crucial in the value chain development, should be mentioned: formalisation and
standardisation. Both trends are important in that they will enhance the codification of
knowledge of the labour processes in this sector. Formalisation relates to the increased use
of procedures to documenting and organising the work and to monitoring the performance. This can include the use of documentation and (digital) knowledge-sharing tools,
the implementation of ISO norms, the use of Service Level Agreements in customer contacts, the formalisation of job and skills classifications. Standardisation refers to the use of
general applicable methods for software development, such as the development of modules, control and testing standards, the definition of interfaces, etc. In one of the case
studies the term ‘industrialisation’ of software development is used to denote an overarching systemic standardisation and formalisation affecting all activities in the chain. In
the WORKS report ‘Value chain restructuring and company strategies to reach flexibility’
(Flecker, Holtgrewe, Schönauer & Gavroglou, 2009) the role and effects of different forms
of standardisation on the company’s responsiveness are dealt with in more detail.
Finally, it should be noted that, as in the clothing industry, the role of ICT infrastructure plays a growing role in the value chain co-ordination and the closing of the information flows. This relationship is also analysed in-depth in the WORKS report ‘Employers’
use of technology and the impact on organisational structure’ (Greenan, Kocoglu,
Walkowiak, Makó & Csizmadia, 2009).
2.2.3
Research and development in IT: between research and market
The main trend found in the R&D in IT units investigated in the frame of the WORKS case
study research is not in the first place a fragmentation of the activities and knowledge
along the value chain but rather a shift to activities that are closer to the market than the
original basic research work. Different types of restructurings were observed: acquisition
of independent labs by large TNCs, privatisation leading to a comprehensive reorganisation and reallocation of the different research units, decentralisation of research of a global
company to sites at the proximity of universities, spin-offs of universities acquiring public
funding research projects and/or reorienting to private company customers. Three out of
the four cases are R&D units of larger companies that acquire projects from other units of
the same company. However, all case studies experience a move from basic, fundamental
research to more commercial innovation and product development research. Being situated at the ‘origin’ of the value chain, where academia is bridged to market, several
organisations are embedded in an institutional innovation environment where public
funding mechanisms in one way or another are important. This is obviously the case for
the research centres that are spin-offs from universities and for units that work closely
together with universities or attract public funding for specific research projects. Even for
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CHAPTER 2
these, the market orientation increasingly plays a role in terms of institutional legitimacy
and because third party funding gets a more important share in their portfolio.
In terms of the location of knowledge in the value chain, and possible changes in this
due to restructuring, this R&D business function has a particular position at the top of the
value chain: knowledge creation is intrinsically the core business with main activities
being conception of products and systems, designing and prototyping and development
work. The clients are typically companies who combine different products in complex
configurations of products and services before entering into the market. The growing
importance of commercial orientation connects them more closely to the software development value chains. But the value chains, where they exist, are quite complex (Flecker et
al., 2008: 26).
Knowledge creation is obviously the core activity and a clear trend towards the codification and standardisation of knowledge as can be described in the other sectors is not so
clearly discerned, unless to the extent that a shift to more project-funding (either from
public or private funding) implies a certain bureaucratisation and administration of the
research activities. The main changes in the use of knowledge and the type of knowledge
work come from the growing market pressure. Hence, major changes relate to a reorientation of the kind of knowledge work that is central, notably knowledge required for
developing market-oriented projects and in view of identifying new market niches. This
means that market and technology observation becomes part of the research (Flecker et al.,
2008: 26).
As will be elaborated further, this growing market orientation has a lot of implications
on both the organisation of work and the use of knowledge. The employment effects of
restructuring as such were in most cases limited due to the key position the knowledge
workers occupy in the value chain. The specificity of this high-level knowledge work and
the historical position that the companies and researchers have acquired as a result,
implies that their power-base in negotiations with customers, whether these are situated
within the company or outside, is considerable. The case studies seem to indicate that the
important knowledge-base that these research units intrinsically posses, also influences
their current and future work because of the considerable autonomy and strong bargaining positions the employees can maintain. This is illustrated with the Norwegian firm A
NOR, a firm specialised in search engine technologies started-up from the university but
then sold to another internet company that was in turn acquired by a large global internet
corporation. The employees of A NOR successfully prevented that their activities were
moved to the US, which was the idea of the mother company in the frame of a worldwide
concentration and consolidation strategy. Thanks to their specific expertise, the employees
further succeeded to remain considerably autonomous. Despite the context of internal
customer relationship with the other units of the global corporation, their position within
the corporation is based on professional consensus-building and negotiation rather than
on dependency (Torvatn, Anthun & Dahl-Jørgensen, 2007).
One important implication of the growing market orientation to notify is, however, the
changing time frame of the projects and a general speeding-up of the work. Another
implication is the importance of proximity of the employees working in a team. In general, the geographical spread of this kind of activities is much less than in software development. In the restructuring cases that implied geographical relocation, employees complained about the problem of distance for their project work. In other cases, the units were
24
THE ROLE OF KNOWLEDGE
intentionally located close to universities as part of regional innovation clusters, intentionally spread over different sites for the same reason, or more closely linked to the
mother company. The UK company UK Lab, for instance, is one of three R&D units of a
Japanese technology company specialised in speech technology (Gosper, 2007). UK Lab is
deliberately UK located where it is at the proximity to a world-leading speech group at
the university with whom it collaborates. Originally it was intended to do basic research
for the Japanese mother company, but basic research and development work were then
redistributed across the sites since Japanese research staff were dissatisfied and perceived
their research possibilities to dwindle (Flecker et al., 2008: 28). This indicates that despite
the general trend towards more market research, basic research still seems to be most
attractive for research units in software development.
We may conclude from the case studies that the growing importance of market-funded
and market-oriented projects in the research portfolio seems to lead to more complex
value chain structures with blurring boundaries between the three typical basic steps in
the R&D parts of the value chain: (fundamental) research, (market-oriented) innovation
and commercialisation. In addition, it seems that the key strategic objective of these companies, which is innovation, clearly influences location decisions in the restructuring in
view of establishing proximity between the highly knowledge-intensive nodes in the
chain.
2.2.4
The food sector: between local embeddedness and internationalisation
The food processing industry undergoes a process of international restructuring in different directions, including outsourcing, insourcing, subcontracting, centralisation, and takeovers. Knowledge (skills, qualifications and experience) does play a role in these processes. However, this role is also closely related to the typical product characteristics in this
sector. First of all, food products require high-quality standards in terms of consumer
health and safety and are for that reason subject to strict national and international regulation. Product quality and product innovation are important aspects of the market strategy of modern food processing firms. This is reflected in the development of R&D
departments as well as in the standardisation and quality control systems. In other words,
the strong pressure to improve the product quality has resulted in the development and
integration of new and higher levels of knowledge in this industry and/or in collaboration with specialised technology centres (laboratories, universities).
Secondly, a key characteristic of the food processing industry is its local and regional
embeddedness. Most of the companies find their roots in the neighbourhood of the producers of the raw materials (vegetables, fruit, milk, meat, fish, etc.). The requirement to
process fresh products as soon as possible explains why the core activities typically are
concentrated near the producers of the raw materials (such as farmers). This characteristic
has an effect on the mobilisation of knowledge needed. Companies become dependent on
either labour markets with a supply of skilled workers, or close collaboration with specialised technology centres, and/or the development of (internal) training and education
facilities.
Thirdly, experience-based and shop floor knowledge seems still important in the food
processing industry, in particular in production. However, even in departments such as
logistics, the importance of experience-based knowledge (on-the-job training) were
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underestimated in the management strategies to reorganise and relocate operational tasks,
as illustrated in the Benelux Logistic case: management started from the premise that
most of the export activities did not require a significant amount of know-how and that
the tasks were repetitive and standardised, however ‘according to the employees, experience was the most useful factor in carrying out the activities’, and the ‘restructuring process underestimated the importance of tacit knowledge’ (De Bruyn & Ramioul, 2007b). In
this case, employees of the destination company joined the source unit for three weeks, a
period assumed to be sufficient by the management to transfer all knowledge required for
the job. However, it turned out that this was far too short and after several months, the
unit in the destination company still underperformed, a lot of difficulties were reported to
the source unit and these problems had to be solved by the former employees (De
Bruyn & Ramioul, 2007b). Further, different cases report that notwithstanding codification, standardisation and automation of production tasks and procedures, the product
quality still is (partially) dependent on experience and motivation of the production
workers. The improvement of product quality cannot only be realised through (radical)
innovations from R&D departments or external laboratories, but is equally dependent on
‘incremental innovation’ in the production process itself.
In other words, the relation between knowledge and restructuring strategy is a ‘doublebind’ situation in this sector. On the one hand restructuring is (often) accompanied by
technological developments, innovation and quality improvement, which combine both
strategies of knowledge codification and innovation. On the other hand the need for specific skills (including experience-based knowledge) and the availability of these skills on
regional or local labour markets sets limits to the direction and location of the restructuring.3 The ‘double-bind’ situation is also reflected in the tension between price competition
and product quality. The first strategy may for instance lead to outsourcing of activities to
low-cost labour markets with hardly qualified labour supply. The second strategy will
push the strategy in the direction of labour markets with a more qualified skill structure.
The Italian frozen vegetables case illustrates this dilemma when it reversed an original
outsourcing strategy into an insourcing strategy, due to low-quality output: ‘the management has expressed dissatisfaction over the outcome of the outsourcing process, which
has resulted in an unexpected worsening product quality’ (Pedaci, 2007a: 7). The
insourcing strategy in this case was clearly driven by the need to improve and guarantee
the product quality. Not only former outsourced activities were insourced, but also the
former strategy of buying finished products from the market are now expected to gradually be internalised (Pedaci, 2007a: 5). These examples illustrate the relevance of product
quality in the food processing sector and its effect of restructuring strategies, and as such
as well its effect on skills.
The cases in the food sector were particularly relevant in illustrating the importance of
shop floor knowledge. Different case showed how the importance of such knowledge was
underestimated for securing smooth administrative processes (as was illustrated with the
logistics case study) and for maintaining levels of product quality and incremental innovation in case of the production function. This underestimation urged the management of
3
This point is the central issue in the Varieties of Capitalism Theory. Hall and Soskice in particular made
the strong statement that in the end ‘strategy follows structure’ (…).
26
THE ROLE OF KNOWLEDGE
these companies to take into account transition periods and to digest a period of underperformance at the destination company and, in another case, led to decisions of reversing
outsourcing.
2.2.5
IT in public administration: between eGovernance and context specificity
Public administration - both front and back office - is undergoing a process of both national and local restructuring. The driving policy force behind the ongoing restructuring is
‘the challenge of improving the efficiency, productivity and quality of public administration services (…) with unchanged or even reduced budgets’ (Commission of the European
Communities, 2003: 4). This tendency can be summarised in two different orientations, a
‘cost-orientation’ and a ‘service orientation’.
The cost-orientation or ‘output orientation’ coincides in many cases with the popularity
of the new public management ideas according to which public organisations should
operate as private enterprises (Pollitt & Bouckaert, 2000). This market orientation includes
an increasing relevance of performance indicators embedded in agreements settled at
forehand, such as is also illustrated in the Service Level Agreements (SLAs) in the UK City
Council case. The ‘service orientation’ or ‘content-orientation’ coincides with the increase
of the quality of services, development of new services, a better fit between client and service provider and a better fit between policy, regulation and services. Both orientations
play a role on the background of the public administration restructuring. On the foreground, three more specific - and interrelated - strategies can be deduced from the case
studies: (1) the application of new information and communication technologies (ICT),
(2) the standardisation and simplification of certain tasks, and (3) a stronger customer orientation to both individual citizens and businesses.
ICT are obviously an important tool for the restructuring strategy of this sector, but it is
not just the effect of technological development as such which is important. The application of ICT in the public administration sector is also explicitly embedded in new ideas
about governance in modern society and has been labelled ‘eGovernment’. A recent definition of the European Commission gives a good indication of the interpretation of this
concept by policy makers: ‘Information and communication technologies (ICT) can help
public administrations to cope with the many challenges. However, the focus should not
be on ICT itself. Instead it should be on the use of ICT combined with organisational
change and new skills in order to improve public services, democratic processes and public policies. This is what eGovernment is about’ (Commission of the European Communities, 2003: 4)
The WORKS case studies provide several examples of these combinations of ICT applications with organisational change. The case studies also suggest a key role of knowledge
in the restructuring process. The Dutch GBA case study on outsourcing IT in public
administration describes this process and its effect in detail (Bannink, Hoogenboom &
Trommel, 2007). This case is an example of outsourcing of some of the public administration tasks to an external IT provider. The division of knowledge between municipal governments and the external IT providers does not only include a move of the application of
new software technologies but resulted as well in a creeping shift of the specific legal-substantial know-how from the municipal government level to the IT provider. This shift
coincides with a ‘brain drain’ of public administration workers with ICT skills to the IT
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CHAPTER 2
sector, which - on its turn - stimulated the knowledge shift to the IT providers even more.
This creeping shift has the tendency to make the municipal government dependent from
the IT provider: ‘the result of these changes is a shift in the overall division of knowledge
that supports an increased dependency of municipal governments upon IT providers and
an increased tendency to outsource IT system development and support work to IT providers’ (Bannink et al., 2007: 19). This knowledge shift in the Dutch case was possible since
the IT provider had a long and close relationship with municipal governments. The provider was actually founded by the municipal governments in the past to deliver a collective service for this sector. Just because this provider was familiar with the sector and the
specific local tasks and functions has been a reason why the IT was not outsourced to a
commercial external IT provider not related to the public sector.
The UK case of transferring IT to an external provider further illustrates this point. The
UK case City Council describes how a local city council decided to outsource the IT
department to a private service provider, not familiar with the sector. Due to strong
workers resistance the IT activities were not transferred to the external private organisation, but the IT department of the City Council kept by and large the same structure: ‘IT
staff still work in the same offices, have stayed on the same terms and conditions and are
still working in similar team structures’ (Dahlman, 2007a: 12). What has changed is the
standardisation and formalisation of the work, due to the application of standardised
templates and IT systems.
ICT knowledge and related skills are becoming increasingly important and they open
up possibilities to transfer particular services to external providers. However, sectorspecific knowledge seems to play an equally important role, both in the direction and in
the possibilities of value chain restructuring. The cited European commission’s eGovernment definition already indicates some of these ‘sector-specific’ elements when ‘orientation to democratic processes and public policies’ is underlined. The case studies indicate
also some of these ‘sector-specific’ aspects. The Belgian case study ITPRO points to the
policy of the Wallonian administration to guarantee ‘every service must remain affordable
and accessible either via tele-mediated means (internet, call centres) or face to face relationships’ (Vandenbussche, Devos & Valenduc, 2007: 8). The same report also asserts the
relevance of ‘citizen’s needs and expectations towards their administration’, with respect
to accessibility and availability of administrative services, affordability and completion of
administrative documents, speed of services, proximity of services (ibid.: 8). Also the UK
IT case refers to a ‘public sector ethos’ (Dahlman, 2007a: 11) and states, ‘an important
actual skill is to understand how the public sector works, share the values of serving the
community’ (ibid.: 15). The described knowledge shift in the Dutch IT public administration case GBA has resulted in an increasing dependency of the public administration from
the IT provider. To safeguard the public character and the service orientation of the final
‘products’ the local administrations have set up new forms of co-ordination.
The importance of direct communication and relation between local government and
citizens not only affects the spatial scale of restructuring, but underlines as well the
growing importance of communicative skills of employees in this sector. The local dependency is also reflected in the need of a continuous development of knowledge of (constantly) changing regulations and local services (hundreds of different services). The cited
Dutch GBA case study on the use of IT in public administration confirms the dependency
to the sector-specific context (Bannink et al., 2007). Outsourcing in this case was not just a
28
THE ROLE OF KNOWLEDGE
‘technical operation’, which could have been taken up at any place on the globe. The case
study gives a detailed description of how and why the external provider needs a close
relation to the sector. To develop IT programmes the provider needs to have knowledge
about the legal system, the functioning of public administration and the variety of (new)
services.
In the IT support function, cost reduction also played a role, but more indirectly, as a
strong motive for outsourcing this from the public sector to private companies being to
take advantage of the economies of scale offered by global service suppliers. Typically this
function requires a considerable amount of customer-specific knowledge which, in many
cases, might act as a disincentive to outsourcing. However, at least in some countries
(notably the UK in our case studies), this problem is solved by the transfer of personnel.
Thus the same people continue to do more or less the same tasks, but under a situation of
contractual outsourcing. Although it can be separated contractually by such means, the
need for this knowledge amongst the work force does, however, appear to act as a strong
disincentive to spatial relocation.
In conclusion, outsourcing of pubic tasks has to meet specific conditions and these
tasks cannot be transferred arbitrarily to any provider or any place. This can largely be explained by the requirement of having specific knowledge on both the particular public
sector as on the customer needs. While ICT play an important role for the codification of
the knowledge that has to be transferred to the external service provider, it became obvious that for the knowledge that could not be codified that easily, other solutions have to
be found. In this respect, two conditions for outsourcing could be identified in the case
studies. One condition for an effective transfer of services is that the external provider
should be familiar with the sector. This explains why in the Dutch case particular activities (ICT support) were transferred to an external provider that had already a long-term
relation and even was originally founded by the collective of Dutch municipalities. As
such the external provider is in a sense strongly connected to the sector. Surprisingly, the
outsourcing in the UK city council IT case to a private organisation without a long-standing and close relation with the public sector did not result in a substantial organisational
shift. The IT department kept by and large the same structure with almost the same tasks
and almost the same staff (Dahlman, 2007a: 10). There are indications that this was required to secure access to indispensable knowledge. A second condition for an effective
transfer is the development of (new modes of) co-ordination to secure the availability of
sector-specific knowledge: the public role, service specific knowledge, etc. Different case
studies report tendencies of new types of co-ordination. The Dutch case study illustrates
how the analysed municipality has developed a more intensified co-ordination process
after the outsourcing to safeguard the specificity of the service. The need to keep a close
relationship to the sector and to co-ordinate different new activities has, in the Belgium
case, led to what has been labelled ‘internal externalisation’.
2.2.6
Customer services in the public sector: fragmentation of the value chain
Not only for public administrations the increased pressure on both cost-orientation and
service-orientation can be identified as major drivers for organisational change. The same
rationale, embedded in a general policy of liberalisation and privatisation, can be identified as an important explanation for restructurings in the customer services of the public
29
CHAPTER 2
sectors like post, railways, police, housing services, Employment agencies, telecom and so
on, such as they were investigated in different case studies in the WORKS project.
Next to this growing combined cost- and customer-orientation, some specificities
should be taken into account when assessing the changes in this business function. As
clarified by Dunkel and Schönauer in Flecker et al. (2008: 101) customer services have
some specific key characteristics: intangibility, perishability, variability, simultaneous
production and consumption and inseparability. These characteristics are particularly
important for the knowledge perspective, since they imply that the knowledge involved
in providing interactive customer services is to a great extent inalienable from the person
who delivers the service and therefore has a considerable tacit dimension. As a result,
knowledge codification and transfer might be possible only to a limited extent. The debate
about this specificity of the knowledge dimension in service work is reactivated with the
widespread dissemination and use of information and communication technologies.
Because ICT make it technically and economically feasible to store, process and disseminate information, which is a process of codification, these technologies have the capacity
to codify kinds of knowledge which may so far have remained tacit. Further, the digital
convergence between communication technologies and computer technologies renders
feasible any combination of communication forms (between individuals, organisations
and machines) and creates possibilities to network, interact and communicate around the
world (Soete, 2001: 143ff). The information processing and storage capacities of ICT and
their impact on communication allow for a growing separation of production and consumption of a lot of services and therefore make distances less relevant. An important
question is therefore what are the constraints of this knowledge-specificity for the restructuring of customer service activities.
A final characteristic to be taken into consideration is the role of the customers in the
customer services value chain since they too are able to add value to the service (Böhle &
Glaser, 2006; cited in: Flecker et al., 2008: 102). The increasing trend towards self-service
can be observed quite generally in society, including in a lot of public services. Here too,
ICT play an important role in facilitating self-service, for instance in allowing the customers to purchase their own tickets and make their own reservations in public transport or
in facilitating self-service information desks for job-seekers.
In the WORKS case studies, restructurings are investigated in a wide variety of public
customer services, and the forms these restructurings take are equally manifold. The
restructurings are highly-determined by the national context and the kind of public service concerned. A detailed analysis is included in several other WORKS reports. Here the
main aim is to detect how knowledge might play a role in the restructuring.
Despite the considerable varieties in the case studies, it emerges that all restructurings
involve a new division of labour and a redesign of the workflow of the customer service
and often the establishment of new services (Flecker et al., 2008: 107). The most obvious
change in the division of labour can generally be described as a fragmentation of different
types of customer services along the value chain according to their codifiability. ‘Customer services’ is an umbrella term, including a huge variety of services provided, and
hence very diversified concrete tasks, depending on the complexity of the service, the
interaction with the customer, the length of this interaction, the frequency of service
requests, their urgency etc. Valenduc, Vendramin, Krings and Nierling (2008: 144ff)
30
THE ROLE OF KNOWLEDGE
identify several key characteristics of customer services that are specifically important for
the front office employees that were studied in WORKS:
 the degree of interactivity between customer and employee in the service relationship;
 the degree of personalisation of services or the degree to which they can be standardised or should be customised to the needs of the customer;
 the time dimension of the service relationship (short or longer contact) and the need for
follow-up (versus on-off questions).
At the one end there are the extremely short, repetitive and often simple questions
implying no real personal interaction (but rather mere ‘encounters’ with the customer)
which can and are probably easily codified in scripts, protocols and procedures, increasingly digitised and closely directed and monitored by ICT. These kinds of services are
rather low-skilled tasks. At the other extreme, there are the complex and difficult questions for advice and consult, sometimes in crisis situations or situations requiring urgent
action and typically mobilising professional knowledge and inter-personal capacities of
the employee to guarantee a high qualitative response. Obviously such customer service
tasks require far more skills. Between the two there is a large continuum of varieties of
customer services. The fault line between those services of which the knowledge can to a
large extent be codified and standardised and those services which rely considerably on
experience and on tacit knowledge, because they require face to face contact, more intensive human interaction and an approach seized to the specific customer, is not easy to
identify. Company restructurings explicitly involving a clear division of labour between
the codifiable and non-codifiable services will have to be based on the identification of
this fault line.
Considerable parts of the customer services concern telephone services. Generally, the
restructurings investigated imply a centralisation and outsourcing to specialised firms of
those parts of the customer service work that qualify for telephone treatment. This relocation is, firstly, accompanied by a standardisation and formalisation of the work and, secondly, technically empowered by ICT. These ICT generally contribute to the standardisation and digitisation of the procedures to handle the customer calls. In addition, they
allow a close surveillance, both by the direct supervisors and by the outsourcing public
authority. The design of the work organisation of this type of customer service work is the
typical call centre model, known from a large body of research. However, it may be obvious that there are still great varieties in the kind of services provided, in the complexity of
the customer queries and, hence, in the organisational design of the call centre as can also
be found in other sectors than in the public sector.
Often, the fragmentation of the customer service into a part that can be handled by
telephone is prompted by the need to install a ‘gatekeeper’ for the most standardised service queries and hence, to free resources for those services that require a more personal,
mostly face to face, approach. The latter types of customer services are organised in very
different ways in the cases investigated, although we found them both in house and outsourced. Here too the support of a technical infrastructure is important, for instance to
support knowledge sharing (FAQ’s etc.) amongst employees. Finally, as mentioned
before, the customer becomes a fully qualified actor in his or her own service delivery:
internet-based or not, where possible self-service is implemented.
Next to this typical trend of fragmentation of those parts of the customer services that
qualify for being separated in view of efficiency, cost reduction and freeing of resources
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CHAPTER 2
for the more complex customer needs, the case studies also included another type of restructuring, notably found in postal services: the outsourcing of a wide ranges of face to
face services in a decentralised way to many, spatially distributed private companies (for
instance retail or petrol stations). Here too, technical infrastructures are implemented in
order to monitor and control the performance.
In the more or less generalised pattern of redesigning the division of labour of the customer service business function, it may be concluded that the extent to which services can
be codified and isolated plays a decisive role. Dictated by the general policy of combining
cost-considerations with customer-orientation, some services can indeed more easily be
codified, standardised and (cost-)rationalised, while others still remain highly dependent
on the personal judgement of the request and the face to face contact with the customer.
Company restructurings explicitly involving such a division of labour will have to be
based on the identification of this fault line. It can legitimately be assumed that in a context of company restructuring based on the rationale of both cost-reduction and customerorientation, the precise identification of this fault line is important for the management
and will be based on the analysis of the work process. However, considering that in the
day-to-day practical execution of the work codified knowledge cannot fully be isolated
from its tacit dimension, one might also assume that this ‘fault line’ is constantly moving
and more services may gradually be outsourced. Further, the fragmentation of the value
chain of customer services and the extent to which tacit knowledge is neglected may
imply risks for the quality of the service delivery.
The WORKS case studies provide ample examples of described forms of fragmentation
of the more codified and the less codifiable customer services. City Life in Austria, for
instance, is a service offering council housing that outsourced the telephone-based customer services to a consortium of several call centres, which acted as a filter for the more
difficult consults, which even included client visits at home. The Italian DVLA is the public administration for the driver and vehicle licences who subcontracted the telephonebased customer service mainly for cost reasons. In the Swedish PCC case, the Swedish
police force implemented a telephone-based contact centre for first-line and non-urgent
crime reporting and customer requests in order to free resources for the more ‘serious’
police work. The police organisation had developed new information services for these
first line crime reports by citizens. Before the restructuring, trained and qualified policemen at local police stations were responsible for this activity and it was considered, especially for simpler errands, as ‘a waste of police resources’ (Tengblad, 2007: 12). Outsourcing of this activity was not considered by the involved actors as deskilling but instead as a
necessary reduction of the workload. For the new information centres this transfer on its
turn resulted in new jobs with specific skills, comparable with call centre skills. The work
is more standardised and codified and based on a specific police software system (RAR).
The standardisation and application of the IT software on its turn opens the possibility to
centralise the various information centres in one or a few at the national level. However,
the need to improve the relationship between citizen and police (one of the motives to
start these information centres) results in a pressure to keep a decentralised structure at
the same time.
Other cases mainly show how reorganisations imply the outsourcing and decentralisation of the face to face customer services. These cases are mainly found in post services
(Austria, Sweden and Greece) where private post partners deliver some of the postal
32
THE ROLE OF KNOWLEDGE
activities. Sometimes such a decentralisation and privatisation also implied the further
development of existing or enlargement of new services to private or business clients.
Similarly, several other cases show how the restructuring of public services may imply
the creation of new services or the implementation of some services that were only implicitly fulfilled before. The prime example here is the case of the German railways where
the comprehensive restructuring of this huge organisation into different separate companies led to the actual creation of a specific, separate customer service whereas this was
conceived before as a secondary task of track supervisors.
2.3
Conclusions
The value chain restructuring as studied in different sectors and for different business
functions suggests indeed that organisations externalise the most codified parts of the
labour process while they tend to concentrate on the more knowledge-intensive activities
because these are essential for their competitive positions. The latter strategy might lead
to internalisation, rather than externalisation, of business functions. Such a concentration
on the more knowledge-intensive parts was observed for logistics and design in clothing,
the complex parts of software production in software industry, experience-based production knowledge and quality requirements in the food processing. Moreover, the cases of
the customer services in the public sector illustrated very clearly how the value chain was
fragmented at those points where the knowledge, in this case of particular customer services, can most easily be codified. The separation of the codifiable parts of customer services goes hand in hand with the strengthening of the more personalised and more complex types of services and hence combine rationalisation and cost-effectiveness with
increasing customer- and service orientation. In the outsourcing of the IT function in public administration, the cases show how the outsourcing of these activities to a private IT
supplier implies a gradual and substantial transfer of the knowledge from the public
administration to the service provider.
In all sectors and business functions investigated, ample indications were found which
confirm that the spatial relocation of knowledge and knowledge codification in view of
restructuring are limited, that tacit knowledge does play a role in good performance and
that it is important for a smooth production process. In the clothing industry the risk of
knowledge fragmentation related to the complete isolation of production activities within
the value chain seems to set a limit to value chain fragmentation, despite the fact that the
restructuring, as well as investments in organisational technologies such as ERP systems,
explicitly aim at integrating knowledge coming from different parts of the value chain. In
the software industry, the combination of knowledge from different sites seems to be
required for software development projects, despite the competitive relationship between
these sites. Here, the empiric suggests that the lengthening of the value chains does not
prevent that different sites are ‘knowledge dependent’, which indicates the need for (relational) proximity. In the food sector, different cases report that, notwithstanding codification, standardisation and automation of production tasks and procedures, the product
quality and a smooth administration of logistic processes are still (partially) dependent on
experience and motivation of the employees. The improvement of product quality eventually depends on ‘incremental innovation’ and on the tacit knowledge of employees. In
the outsourcing of IT in public services, it became clear from several case studies that out-
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CHAPTER 2
sourcing had to take account of two specific conditions and that IT cannot be transferred
arbitrarily to any provider or any place: familiarity with or proximity to the sector and the
development of (new modes of) co-ordination to secure the sector’s specificities. The
importance of proximity in this sector is also reflected in the need for a continuous development of knowledge on (constantly) changing regulations and local services. To develop
IT programmes, the provider needs to have knowledge about the legal system, the functioning of public administration and the variety of (new) services offered. Hence, the cases
show how outsourcing was only possible to providers close to the administration, with
which a long-term relationship exists, or when the transfer of personnel was involved. In
customer services, the features of these services imply that it is difficult to identify what
parts of the service delivery can be isolated and what not. Here, the fragmentation of the
value chain and the extent to which tacit knowledge is neglected might imply additional
risks for the quality of the service. In several case studies, transition periods for a
smoothless overtaking of activities were underestimated.
In conclusion, the case studies in highly diverse sectors and business functions point
out that externalisation of codified activities and the fragmentation of knowledge along
the value chain indeed occurs but that this may hamper the smooth production of products and services, the combination of knowledge necessary to co-ordinate the activities
along the chain and the innovation of knowledge. Hence, a certain level of proximity is
required and the management has to take steps to secure the access to (the tacit dimensions of the) knowledge and to co-ordinate the circulation of knowledge. In different sectors, this explicit need for new, additional co-ordination at the level of the value chain
came to the forefront. In the IT in public administration, a condition for an effective transfer is the development of (new modes of) co-ordination to safeguard the sector-specific
knowledge. New co-ordination skills were further observed in the clothing industry and
the software development industry.
It was also observed that externalisation does not necessarily imply a change in economic relationship, i.e. a contractual change, but can occur under different governance
models in between the hierarchical versus market-driven models. In the customer services, the cases showed that the general trend of separation of the two kinds of customer
services may occur under different governance forms: in some cases it is the standardised
parts that are outsourced, while the more complex services remain in house, in other
cases, the more complex customer-oriented activities are outsourced to specialised firms,
while the more standardised services are further rationalised in house. Regardless of the
governance form, controlling the knowledge and the more complex work seem to be the
subject of struggles between the actors involved: in the software development sector this
was explicit in the mechanisms of internal tendering and the requirement to move up the
value chain, in the clothing sector it is illustrated by integrating the, at least adjacent, steps
in the value chain; in the food sector it was observed in the struggle to maintain experience-based knowledge in house, etc. Further, organisations need to move up the value
chain, which might also explain the dynamics in restructuring (e.g. the acceleration of
mergers, acquisitions, outsourcing and offshoring) in particular in sectors such as the
software industry.
In both the food processing sector and clothing, different concurring developments
seem to be conflicting, with a combination of different concurring changes as a result:
technological innovations, product innovations and quality requirements on the one hand
34
THE ROLE OF KNOWLEDGE
and price and productivity competition on the other. In both cases, the local labour market situation and the availability of specific skills will play an important role too, as will
be elaborated later.
Finally, in the IT Research and Development units, knowledge creation is the core
business and the geographical spread of this knowledge is more limited. The main driver
for changes here is the growing importance of commercial innovation in the portfolio,
whether imposed by a shift from public to private funding mechanisms or by a growing
pressure from customers or the mother company. This urges these units to find an optimal balance between the more basic research work, characterised by more uncertainty,
more autonomy and longer time horizons, and the more commercial work, characterised
by a need for shorter term and marketable results. Hence, the growing importance of
market-funded and market-oriented projects in the research portfolio seems to lead to
much more complex value chain structures with blurring boundaries between the three
basic steps in the of R&D parts of the value chain: (fundamental) research, (marketoriented) innovation and commercialisation. In some cases, these considerations influenced locational decisions in restructuring.
35
3
The organisational implications for the
management of knowledge
3.1
Assumptions and research questions
A next research question is what organisational practices firms will develop for those
activities that they define as core and for which they need to develop a knowledge management strategy. In this section we will focus on the organisational practices in the context of restructuring and how these shape the conditions for the use of knowledge in the
labour process. Such organisational practices may involve further knowledge codification,
and hence facilitate future steps in the technical division of labour and - eventually - possible future restructurings. Or they may, on the other hand, facilitate the use and circulation of knowledge of the employees in the labour process in view of innovation. In the
latter case the working environment might favour different forms of innovation, both
incremental innovation in the form of improvements of the labour process and day-to-day
working practices, and more fundamental forms of innovation and product innovation. In
other words, the innovative capacities of the organisation and its capacities to facilitate
knowledge creation may be strengthened or not as a result of the changes in the work
organisation and labour process that accompany the restructuring. For elaborating this
perspective, the shift is made from the level of the value chain and the position of the
companies in the chain to the work organisation and labour process within the business
functions investigated. The focus will rather be on the technical division of work, and
changes in this related to the value chain restructuring.
In the literature on organisational learning and innovation it is stressed that organisational practices focusing on learning by doing, active interaction, communication and
proximity are shaping the best conditions for combining tacit knowledge with codified
knowledge and for different forms of innovation. Nielsen and Lundvall stress that in the
processes of innovation the particular characteristic of knowledge is important: knowledge (skills and competencies) is not ‘disappearing’ when inputted to the production
process, on the contrary: ‘the more skills and competences are used, the more they develop’ (Nielsen & Lundvall, 2007: 80). Nielsen and Lundvall demonstrate that in particular the combination of several traits of the so-called learning organisation are much more
likely to lead to product innovation. In particular the bundling of different organisational
practices such as an integrative organisation, quality management, human resource
development, compensation systems and external networking positioning, stimulate
knowledge creation (Nielsen & Lundvall, 2007: 65). These organisational practices invite
employees to actively use their skills and facilitate learning. Based on their empirical
research the authors show in addition that there is an interaction, rather than a uni-directional relationship, between such organisational characteristics and innovation, in the
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sense that firms operating in a market where continuous product innovation is a prerequisite, realise that they need an advanced learning organisation: ‘It [i.e. the learning
organisation] is needed in order to organise the different sources of knowledge required
for the innovation as well as coping with unforeseen problems encountered as part of the
innovation process’ (ibid.: 80). Results from organisation surveys on these forms of work
organisation, often based on longitudinal survey data such as collected in the Danish
DISKO, the German ISI, the French REPONSE and the British WERS, confirm and stress
the importance of such complementarities of organisational practices and of a comprehensive strategy towards the learning organisation for the innovative performance of the firm
(Ramioul & Huys, 2007: 23-26).
Closely related to the theories of the learning organisation, and in line of the scholars
who stress the social and interactive characteristics of knowledge and knowledge acquisition, is the concept of ‘communities of practice’. Communities of practice or epistemic
communities denote those groups of people within organisations who are committed to
the same practice: ‘… in which learning is not a matter of conscious design or recognizable rationality and cognitive frames, but a matter of new meanings and emergent structures arising out of common enterprise, experience and sociability - learning by doing.
The concept of epistemic community relies heavily on the socialization of knowledge,
emerging through routines and repeated actions, rather than encrypted in rules or in an
organizational design’ (Ancori et al., 2000: 278). The concepts of communities of practice
and the learning organisation, which are both highly-debated and developed in the literature on knowledge management and on innovation, are points of reference when we
investigate how organisations manage knowledge in a context of value chain restructuring.
But also other theoretical approaches provide arguments for investigating combined
management strategies aimed at knowledge codification on the one hand and at learning
and knowledge innovation on the other. Following the labour process theorists, managing
the knowledge required for the labour process is a central concern in management strategies when implementing the employment relationship (Marsden, 2004: 81; Kaufman, 2004:
67). Knowledge codification and the resulting standardisation of work processes can contribute to the reduction of uncertainty in the transformation of potential labour into
labour and can thus be part of management control strategies in the employment relationship. But in knowledge-intensive organisations, and hence in a situation of restructuring
resulting in a more knowledge-intensive organisation at the higher end of the value chain
(such as we observe in the case studies), a different approach will be required. The work
organisation will have to allow or stimulate opportunities for learning, interaction and
collaboration with others (inside and beyond the firm) in view of problem-solving and of
new combinations of tacit and codified, individual and collective knowledge. In this context, the management cannot content itself with implementing control and knowledge
codification strategies to the limit and will develop collaboration strategies that stimulate
employees to deploy their skills in the labour process in line with the company objectives
(Grimshaw, Willmott & Rubery, 2005: 60). Hence, a related research question in this section is how management practices combine strategies aimed at control and codification
and strategies aimed at autonomy and learning in view of incremental or fundamental
innovation or in function of securing a seamless, uninterrupted production process. This
tension between autonomy and control is ultimately not only important for knowledge-
38
THE ORGANISATIONAL IMPLICATIONS
intensive activities but structural in every labour process in capitalist economies. In the
report ‘Value chain restructuring and company strategies to reach flexibility’ (Flecker et
al., 2009) the issue of the role of tacit knowledge in every work process is elaborated in
terms of its consequences for functional flexibility requirements.
A final issue of interest in the analysis at hand is the question to what extent the
observed organisational changes are skill-biased. Skill-biased organisational change is an
equally intensively investigated issue than changes in work organisation and often
strongly related to the long-standing debate of skill-biased technological change. The
relation between the introduction of new technologies and skill changes is also dealt with
extensively in the WORKS thematic report ‘Employers use of technology and the impact
on organisational structure’ (Greenan et al., 2009). Skill-biased organisational change can
be explained by different mechanisms. A first mechanism is related to the value chain
restructuring itself: the externalisation of lower-added-value activities simply implies the
redundancy of the lower-skilled segments of the labour force from the company. Secondly, skill-biased organisational change can occur when corporate strategies become
more focused on innovation as a prominent survival strategy, rather than on pure costbased strategies. In the competitive and accelerated market environment, the (remaining)
employees do no longer need qualifications to perform fragmented and standardised
tasks, but have to be able to execute more complex tasks and are required to have a view
and knowledge of the wider process to which their tasks belong. Also the skill bias of
organisational change, defined in a more broad sense than dealt with in the frame of this
research project, has been largely investigated in several organisation studies including
establishment surveys. As can be concluded from the comprehensive state-of-the-art
study on the outcome of organisational surveys on this issue, carried out by Ramioul and
Huys (2007), there is indeed important empirical support showing skill-bias. Skill-biased
organisational change can result from the combination of different effects, especially the
reduction of the demand for unskilled work or at least the reduced net employment
growth rates of unskilled and medium-skilled workers, and the renewal of the work force
through an increase in the rhythm of creation of jobs and recruitments, in particular at the
moment of the diffusion of new organisational practices (Ramioul & Huys, 2007: 16ff).
3.2
The case study results
3.2.1
The clothing industry: closing the loop?
In the clothing industry, the restructuring of the higher end companies in the value chain
is driven in the first place by the acceleration of product innovations and time to market.
This development concentrates the required knowledge on two domains: knowledge on
market developments in view of the multiplication and speeding up of the collection
development (design) and knowledge on the logistics and control of the flow of resources,
products and information at the level of the value chain. What strategies do companies
develop to strengthen and facilitate the use and development of such types of knowledge?
With respect to logistics, the cases show strategies of the upstream or downstream
integration of related business functions and of implementing ERP systems. The case
studies confirm the importance of such functional and/or technological integrations in
view of controlling the value chain knowledge. Further, the additional need for estab-
39
CHAPTER 3
lishing specific ‘co-ordination’ is observed. These co-ordination tasks are either assigned
to specific ‘transactional’ functions or included in existing jobs, thus widening the tasks
for the employees concerned. Organisations investing in technical or functional solutions
that contributes to closing the feedback loop from sales to design put information about
the sales at the disposal of the designers, which should allow those to get a quicker feedback from the market on their work. These companies are well aware of the importance of
such a feedback for their product innovation. The importance of feedback loops in product innovation is also confirmed by Nielsen and Lundvall (2007: 67).
Next to trying to close the loop, companies also introduce other measures in view of
their innovation strategies. The organisations in the case study research apply different
organisational practices to facilitate knowledge combinations and circulation, such as the
more efficient combination of different types of knowledge that are required in the design
process itself: knowledge from pattern makers and prototype production in view of production preparation and of a seamless transfer of the models to mass production at
remote production sites is one example. Other practices are the explicit use of knowledge
on fashions and trends in the relevant market niches, knowledge from technical designers
in view of working with new fabrics, and, above all, knowledge to use and interpret
commercial data to take them into account in the collection development strategy. Companies using new fabrics, for instance, implemented teams to bring together aesthetic and
technical competences. In the WORKS case studies in the clothing industry, illustrations
are found of the different strategies that companies can develop for fostering more intense
and speeded-up product innovation in an organisational context of (fully) externalised
production activities and a strengthened design function.
The French Adele specialised in medium to high-fashion women’s clothes provides a
first illustration: while manufacturing was gradually outsourced (except for highly technical pilot production) the company got more and more oriented to marketing and retail,
which was also realised through the establishment of an own retail chain store network.
The two-season-cycle of model development was replaced by a constant renewal of the
collection, thus putting high pressure on the innovation capacities of the company. This
was realised by, on the one hand, partially outsourcing the design process to foreign
fashion agencies and by the establishment of a strong internal purchasing department. On
the other hand and more importantly the designers had to work on several collections
simultaneously. This urged the management to redistribute the tasks between the different workers of the creation department and to shorten the working processes. In addition
the designers have to take into account the commercial data provided by the internal purchase department in order to design marketable clothing (Muchnik, 2007b).
In the Belgian Wonderwear, the management was well aware of the potential of production knowledge in its manufacturing subsidiaries abroad and set up regular meetings
and assigned a liaison officer to take into account the experiences from the shop floor
stitchers for further product and process improvement. Further, they included the former
production workers from the mother company into the design process in view of better
preparing the product specifications and instruction booklets for the mass production (De
Bruyn & Ramioul, 2007a).
However, as was illustrated in the previous section, it seems not obvious to implement
the organisational conditions that allow to fully use and exploit all the different kinds of
knowledge and experiences that are important for product innovation when activities,
40
THE ORGANISATIONAL IMPLICATIONS
and hence this knowledge, are spread over different companies and sites along the chain.
We gave examples where the full externalisation of production activities simply resulted
in the loss of stitching skills. This problem is experienced all the more acute to the extent
that innovation cycles have shortened considerably in a context of increased competition
and speeded up business. Perhaps the difficulties to implement a sound learning organisation, that facilitates mutual learning and the integration of knowledge from sales to
design, might also be explained by another, conflicting trend that became obvious from
the cases: the trend of an overall rationalisation of work processes which is equally necessary to meet the requirements of speeded up innovation cycles and shortened time to
market. The standardisation and monitoring of models and design methods is one form of
such rationalisation, resulting in less time for creative thinking and ‘reflection’ for the
designers. The codification of the design process is further accelerated and intensified by
the use of ICT: both CAD techniques and ERP systems contribute to the standardisation of
the drawing process, the coding and storing of the drawings in databases for a quicker
use and re-use. Finally, some companies report on a strategy of ‘simplification’ of working
processes in view of shortening the product cycle.
Hence, for the business function design, the market developments generate simultaneously two conflicting pressures, more product innovation and shorter product cycles,
which may result in opposite knowledge management requirements and strategies: one
based on codification - in view of rationalisation and speed - and one aiming at the combination of aesthetic, technical and commercial knowledge for the design of he collections
in view of innovation and creativity.
3.2.2
Software development in the private sector and IT in public administrations: the
prisoners’ dilemma of knowledge sharing
For the software production companies, the matter seems to be to maintain and develop a
competitive knowledge-base in software development in order not to slide down the
value chain in the (internal) tendering processes. The outsourcing or offshoring of more
standardised work (such as maintenance, testing or quality control) down the chain to
free resources and to remain cost-competitive is an important strategy here. But in addition, these firms too need to adapt their work organisations in order to enhance and facilitate innovation and in order to invest in the constant renewal and long-term availability of core skills on which their immediate and future position in the value chain depends.
The software companies in the case study research apply different strategies to this aim.
Project work for instance, organised around customers or technological domains, is quite
generally applied and constituent in this sector and such a work organisation typically
favours a collaborative working environment and learning opportunities. However, it
seems that building up a local knowledge-base increasingly relies upon collaboration
beyond the company’s boundaries, both with remote sites as with other firms. This is
obviously the case in the global sourcing situations where different sites have to compete
internally at first, but then need to collaborate with their initial competitors in order to
compose the final product portfolio for the customer. As a consequence, working over
distance, such as in distributed teams, has become a quite regular practice in this internationalised sector. Next to this, working beyond the company’s borders may include closer
and longer-term relations with customers, who seem important to the local knowledge-
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CHAPTER 3
building, as several companies report and as was illustrated earlier with the Bulgarian
former spin-off company Softserv. The switch towards customer-based instead of technology-based project teams observed in two cases may also be an indication for this. On the
other hand, a growing influence of the customer on the staff composition and skill base
for a particular project may also reduce the local autonomy with respect to task assignments; hence, it is not always clear that the increased interaction with the customer is necessarily facilitating learning or innovation.
In the cases of the outsourcing of the IT function from the public administrations, a
similar trend can be discovered: here too the IT providers tried (and sometimes, but not
always, succeeded) to ‘move up the value chain’ by gradually offering more and more
complex IT services. However, active collaboration with the public administration as their
customer came forward as an explicit requirement in view of taking account of the specificity of the administration. In order to develop IT programmes, the provider needs to
have knowledge about the legal system, of the functioning of public administration and of
the variety of (new) services. The described knowledge shift in the Dutch IT public
administration case GBA, for instance, has resulted in an increasing dependency of the
public administration from the IT provider. To secure the public character and the service
orientation of the final ‘products’ the local administrations have set up new forms of coordination.
Again we see conflicting requirements, related this time to the increased necessity for
collaboration and communication in view of product innovation. This results in different
tensions. A first tension is experienced and reported very explicitly: the choice between
building up locally the strategic knowledge necessary for the future (internal or external)
competitive position on the one hand and sharing and combining knowledge across sites
and teams, increasingly operating on an international level, in view of knowledge innovation on the other. A second tension is between knowledge innovation and the growing
standardisation and formalisation of processes and procedures. Companies from the case
studies applied different organisational practices to realise the first and to implement an
‘organisational learning’ situation. The Bulgarian spin-off and taken-over company
Softserv deliberately maintained informal work environments, flat hierarchical structures,
decentralised responsibilities, open communication, functional flexibility in view of
investing in the knowledge capabilities of their organisation (Galev, 2007). The Croatian
company Digit, serving exclusively its only Austrian customer Messenger, introduced
more innovative, case descriptions instead of very detailed work specifications in order to
build up more rich communication with their client-company (Flecker & Schönauer,
2007). Yet another firm, the Hungarian Domain soft, in its struggle to move up the value
chain, succeeded in supplying higher value-added services partially by investing in different (a.o. computer-supported) tools for knowledge sharing. Further they introduced a
multi-layer matrix organisation and developed a highly-elaborated classification system
of skills and functions to optimise the allocation of their experts and an improved development of their careers. These strategies, designed to establishing a community of practice, could however not fully prevent a considerable work intensification and more flexibility that were equally necessary to cut costs and to respond to the intensified competitive environment (Makó et al., 2007a).
Some firms obviously moved in the direction of more standardisation: one company
evolved towards increased specialisation and ‘compartmentisation’ with a loss of task
42
THE ORGANISATIONAL IMPLICATIONS
diversity and craftsmanship as a result; and other firms experienced more top-down
management and proceduralisation related to the take-over operation by a bigger multinational company. Such formalisations may erode historical informal work practices
which were an important local lever for bottom-up knowledge innovation. This was for
instance reported in the Swedish company INIT, which was taken over by a large US corporation. The restructuring led to the introduction of a new structured competence system to make roles and levels more transparent. This was experienced by some as detrimental to the creative and informal organisation they had before. The restructuring also
affected the learning opportunities on the job. Formal training was now offered more
systematically by the mother company but this was on programming languages, general
technical developments, project management and HR management, while according to
the employees the most effective learning takes place during the job, when developers are
working in teams and changing tasks and positions in the different development projects
(Tengblad & Sternälv, 2007a; Flecker et al., 2008: 55). On the other hand, some cases show
that the scaling-up of organisations related to mergers and acquisitions may also have
opposite effects: the integration of processes and units may also render functions and
positions less clear. Further, mergers can open up opportunities for learning and more
diversified organisational careers, including international mobility. In practice, these
opportunities for international mobility are not always taken up easily by the employees,
especially not when they coincide with family-oriented commitments, which is often the
case given the age structure of this occupational group.
A final obvious trend that is observed in the case studies in this sector is the reinforcing
effect of the accelerating internationalisation: mergers, growing internationalisation and
collaboration across sites triggers the further codification, formalisation and documentation of knowledge and procedures and a more formal definition of tasks and roles, and
this in turn facilitates future relocation and take-over of the work by competitors.
In conclusion, the tension between knowledge codification and knowledge innovation,
based on bringing together both codified and uncodified knowledge in collaborative environments, is clearly observable in this sector. This tension seems to result in a structural
conflict between the requirements to moving up the value chain and to remain costcompetitive. There are indications that this results in a spiral of increasing competitive
pressure and work intensification for employees, who are essentially knowledge workers
who would benefit of an organisational context that stimulates collaboration and knowledge creation in order to secure and develop their core competences.
3.2.3
Research and development in IT: how long will ‘the secret garden’ exist?
The R&D units investigated are basically organised to suit their core mission, which is to
carry out basic and applied research work. This means that they are typically organised in
project teams, often collaborate with universities from which they sometimes originate, or
with other research units from the companies to which they belong. This project work is
mostly organised rather informally, with rotating project leaders and organised around
technical specialisations. Functional flexibility is aimed at but often limited due to the specialist character of each technical domain. High-task discretion is general. Those units that
are organised as internal cost centres of a larger group can often use their key knowledge
in their relationship and negotiation with the headquarters. The competitive internal cus-
43
CHAPTER 3
tomer relationships for units belonging to a larger company, such as they were also
observed in the software development case studies, are often mitigated by such professional relationships based on mutual consensus building.
The more prominent role of applied and market-oriented research, that in all cases
accompanies the restructurings investigated, can be regarded as a key driver of changes in
this professional working environment. Tighter planning horizons, the requirement of
getting quicker to prototypes, more awareness and active observation of market and technology trends and more commercial feeling, have therefore to be taken into account when
organising the work. Firms need to reconcile not only the different time horizons of basic
versus market oriented research but also the more fundamental differences between the
two types of research: the intrinsic uncertainties of the first kind of research versus the
clear expectations articulated by markets and customers of the other. This changing time
horizons may be at odds with collaboration, trust and knowledge exchange that require
more long-term relationships and frequent interaction.
What solutions do the R&D units, organised typically for long-term scientific work,
find to this organisational challenge? This shift to more commercial product development
may sometimes imply drastic reorganisations, such as was the case of the French Comtel
(Muchnik, 2007a). This R&D division of a large privatised French telecommunications
company consists of eight research centres that are geographically spread and are each
divided in different laboratories, which in turn consist of four to six R&D units. In view of
the growing market-orientation of the research units are now organised around product
lines and markets, instead of around technologies and research themes as was the case
before and they are distributed geographically over different sites. The R&D centres have
become internal subcontractors. A matrix organisation combining product development
and marketing is implemented in order to reduce time to market and to put marketing
issues on the research agenda at an early point in time (Flecker et al., 2008: 32ff). This also
implies that there is a structural integration of the three core business functions, R&D,
information systems and marketing, and a systematic collaboration amongst the employees of these units with the explicit aim to develop an understanding of marketing and
product demands by researchers.
In other organisations, differently funded types of research - commercial versus publicly funded - may be managed in different ways but the logics of the commissioned
research tend to spill-over to the independent research. The Austrian IT Research Labs
(Holtgrewe, 2007) for instance are research organisations that aim at bridging the gap
between academic research and industrial innovation and at speeding up technology
transfer. These labs need to rise up to 60 per cent of their funding through projects to complement the basic funding of the Ministry of Economic Affairs. The growing market orientation has not only led to a systematic priority of the market funded projects over the
independent, more academic oriented research, but also to a change in management of the
latter: independent projects will now be proposed and reviewed for their significance and
strategic promise and they will be treated like the market funded projects, including for
instance the use of planning and milestone procedures (Holtgrewe, 2007).
For bridging research to market in terms of competences, different other organisational
options are observed: organisations can add the more commercial tasks (marketing and
sales) and project acquisition to the existing profiles or they can create new jobs specifically focused on these commercial tasks. Generally, the case studies show that both solu-
44
THE ORGANISATIONAL IMPLICATIONS
tions do indeed occur but have each their limitations. Creating a specific sales and project
acquisition function is experienced as problematic to the extent that technical expertise
seems indispensable for the contact with the customer. Adding commercial tasks to
existing research functions, on the other hand, implies that the researcher him- or herself
needs to reconcile the conflicting requirements for both kinds of work. Sometimes experts
combining the two profiles, business and academics, can be hired such as in the IT
Research Labs. In some companies, two distinctive career paths are established: project
management and technical research. Still other companies, such as the earlier described
Comtel set up a matrix organisation in order to combine research and marketing expertise.
Another aspect of the increasing importance of market-related research is a growing
formalisation and standardisation of the tasks in view of facilitating communication along
the value chain. However, this does not mean that tasks are necessarily becoming simpler.
The use of project management tools and more documentation of the work are examples
of such formalisations that originally applied to the market-related and commissioned
research projects but are then increasingly transferred to all the work of the unit, as indicated earlier. Management indicators and market data as well as more formal evaluation
procedures of the scientific work seem to ‘creep in’ in what are intrinsically expert profiles. Such developments can also be regarded as codification of the more ‘procedural’
knowledge of research and development.
3.2.4
The food sector: the key role of experience-based knowledge
In the food processing industry three key drivers of change of the reorganisation and
restructuring process in the food processing industry are observed: the regulation of food
quality (health and safety), product competition (leads to product innovation) and price
competition. Each of these drivers of change has different implications for the management of knowledge as the different case studies illustrate.
The need to improve the food quality results in two different ways to organise knowledge. On the one hand we observe an increase in R&D activities either within the own
value chain (R&D departments) or in collaboration with specialised institutes in the vicinity of the firm. On the other hand, and notwithstanding the fact that most of the work is
not high-skilled in formal qualification terms, the experience-based knowledge in production is still very relevant. Codification, standardisation and automation of production
tasks are certainly an ongoing process in the food processing industry, but it cannot make
experience-based knowledge completely redundant. This type of knowledge still seems a
pre-condition to guarantee the required food product quality or even as an input for
incremental innovation. To mobilise this knowledge source, a commitment of workers to
the production process is required. And this critical point can be observed in a number of
the case study reports, where production workers feel dissatisfied with the effects of
restructuring on their daily work.
As was also assumed based on the labour process theories, these examples underline
that the commitment of workers to the production process and their readiness and willingness to exchange and apply experience-based knowledge required some co-ordination
between management and workers, and/or between companies and trade unions
(Estevez-Abe, Iversen & Soskice, 2001: 181). Viewed from this perspective the need to
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CHAPTER 3
improve working conditions and labour relations - as described in a number of the case
studies - can be explained as well. The objective to improve food quality is also reflected
in training and educational programs and in increased quality control systems as for
instance the different beer case studies indicate. As long as the (improvement of) food
quality in the production process is dependent on the tacit knowledge and commitment of
production workers, outsourcing might not turn out to be a good strategy.
Product competition through product innovation is another important trend in the
food processing industry. Here we can observe reorganisations of R&D activities which
have a direct effect on the organisation of knowledge. R&D typically requires high-skilled
workers (technical high school; university), which means that it makes sense to concentrate those activities in the vicinity of universities or specialised institutes. The Italian
Food case describes how the food processing company has a ‘consolidated co-operation
with universities and research institutes’ (Pedaci, 2007a: 4) in a particular geographical
‘technical localisation that allows it to maximise not only the territory’s physical connotations, namely its market, but also its social, professional and human resources, its infrastructures and, above all, its cultures and traditions, …’ (Pedaci, 2007a: 18).
Price competition is the third important strategy in the food processing industry and it
is one of the driving forces to outsource certain activities and/or to automate tasks. More
successful attempts can be observed in logistics, but with respect to production, this strategy is limited to the need to secure product quality.
3.2.5
Customer service in the public sector: segmentation and codification
From the first section it was concluded that the restructuring of the business function
customer services seems to occur along the line of the codifiability of the service. To state
it simply, the cases learned that the codifiable services tend to be standardised and monitored with the help of ICT, while the uncodifiable services tend to be organised in view of
the company’s objective of a strengthened service- and customer-orientation. While there
are cases where the first type of activities is outsourced (especially to specialised call centres) and the second are kept in house, the opposite was also found. Further, the integration of the customer in the business function and hence in the work process, is clearly
observed in several cases, from public transport to employment services to the post.
When the changes in work organisation of the more codified customer services are
investigated, these can be summarised with the terms standardisation and work intensification (Flecker et al., 2008: 119ff). The supporting technological and procedural environment, such as auto-dialling systems and scripts, are quite typical for call centre work and
often leave little autonomy for the employees involved. For the second type of customer
services, these are regarded as core activities that have to support the company’s objective
of a better customer-orientation. However, here too we find three factors that entail more
knowledge codification, monitoring and control: the growing documentation and standardisation of customer services in view of functional flexibility and interchangeability of
employees, the impact of ICT and the use of Service Level Agreements. Especially the
latter imply a shift of the risks and process interruptions to the employees.
As for the changes in work organisation that relate to these restructuring trends, the
cases show different organisational responses. A first interesting example is provided by
the German Railways. Here, the comprehensive restructuring into different separate
46
THE ORGANISATIONAL IMPLICATIONS
companies led to the actual creation of a specific, separate customer service whereas this
was conceived before as a subordinate task of track supervisors. In other words, the restructuring lead to the emergence of a new explicitly delineated business function, customer service in this case, the tasks of which were previously included in a decentralised
way in the other business functions. The comprehensive organisational restructuring thus
leads to a different bundling of the organisational tasks and the emergence of a new business function. A second crucial change in the work organisation of Railways was the
inclusion of the customer in the service value chain. To make this possible, several interventions were required, first of all the technical facilities that allow self-service purchase
of tickets, second the installation of additional functions and staff to accompany and
‘teach’ the customer how to use them. A third remarkable organisational feature in Railways was the task rotation of the customer service employees allowing a switch ‘on
demand’ between the more standardised services and the more complex customer travel
advise. Here, the company choose for an organisational design where staff deliberately
was made interchangeable and flexible.
Other companies however, seem to opt for an organisational design where the standardised and more complex customer services are split and organised quite differently.
The outsourcing of the telephone service in the Austrian City Life, serving as a gatekeeper
for more complex consulting, went hand in hand with the development of new and more
integrated services in decentralised ‘service centres’. These new service centres include a
team of five employees with different tasks (job descriptions) and different skills and
qualifications. Such a work organisation highly contrasts with the standardised work
organisation of the telephone services, where the tasks became narrow and the work was
considerably intensified and strictly monitored. In most cases, forms of functional flexibility are implemented for the so-called frontline workers to secure the interchangeability
and flexible allocation of employees. Mostly this also implies a certain standardisation of
these services. As will be elaborated further, in work organisations set up in view of
organising more complex service work, several other tools to share knowledge amongst
the employees were implemented, such as the development of knowledge databases and
network-based applications to support high-standard service provision.
Such a combination of contrasting work organisations according to the ‘knowledgeintensity’ of the customer service seems to be quite general. As is elaborated in other
reports of this WORKS report series, such a fragmentation of the workflows is also
accompanied with a fragmentation of the employment conditions, flexibility and job security.
3.3
Conclusions
The case studies show that the externalisation of the more codified activities, resulting in a
moving up the value chain of the firm, and increased market pressures (whether internal
or external) may stimulate the companies to introduce and strengthen organisational
practices that in principle allow to facilitate knowledge exchange, circulation and innovation. In the first place between employees coming from different parts of the production
process. But also the orientation towards more knowledge-intensive activities, such as
research and development (food processing and clothing) may imply the need for a more
‘knowledge-oriented’ management strategy. In other words, the reorientation or stronger
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CHAPTER 3
focus on activities that require the combination of different types of knowledge and
knowledge creation may imply that firms have to adapt their work organisation to better
take account of this requirement. These organisational practices include setting up collaboration with different experts both within the companies and beyond, both with colleagues and customers. They may also lead to the installation of specific ‘value chain’ coordination functions and to the introduction of organisational technologies to strengthen
and close the information loop along the value chain. We observe these trends for instance
in clothing, food and software development, both in private and in public administration.
In the case of the customer service, the fragmentation of the value chain into more standardised versus more complex services mostly implied quite divergent work organisations
and tasks for each, with more routinisation and repetitive work for the first and more
collaborative organisational practices for the latter.
The case of the IT R&D units is different in that this business function is already at the
‘top’ of the value chain and these units are, on the contrary, moving more in the direction
of the market. The characteristics of these working environments are very similar to those
described in literature as the learning organisation. This organisational context and the
knowledge intensive character of the work might mitigate possible negative effects and
knowledge codification related to restructuring. The move towards more market-oriented
projects and outcomes in research laboratories mostly led to explicit measures to facilitate
communication between different types of knowledge (notably commercial and academic/technical) such as the formalisation of tasks and communication procedures. But it may
also imply quite drastic organisational interventions such as geographical relocations, the
implementation of internal tendering procedures or matrix organisations. While these are
implemented exactly in view of facilitating the combination of academic/technical with
commercial knowledge, in practice these organisational changes are often experienced as
threatening the more independent and original research work.
All these cases also support the conclusion of skill-biased organisational changes in the
companies at the higher ends of the value chain that were included in the case study sample. This skill-biased organisational change results from two different mechanisms. The
externalisation of lower-added-value activities implying the redundancy of the lowerskilled segments of the labour force and a reorientation on innovation as a prominent survival strategy, rather than a company strategy based on pure cost-strategies. In a competitive and accelerated market environment, the (remaining) employees have to be able
to execute more complex tasks and are required to have a view and knowledge of the
wider process to which their tasks belong.
In general, two different observations qualify the optimistic conclusion of a possible
evolution towards more learning organisations (at the higher end of the value chain)
resulting from restructurings. First, as in the R&D case, also in other sectors it became
obvious that there might be quite a gap between the potential learning opportunities and
the reality. The cases of the clothing industry showed that attempts to close the information loop were counterbalanced by knowledge fragmentation and loss along the chain and
by the increased speed of the innovation cycles. A genuine importance of ‘shop floor
knowledge’ for successful product innovation, especially in a context of shortened innovation cycles, appeared to be acknowledged by the management in some firms, but
apparently not in others. Similarly, in some food companies, the management was confronted with the consequences of neglecting the importance of tacit knowledge at the
48
THE ORGANISATIONAL IMPLICATIONS
shop floor. In the software industry, we can again refer to the difficult reconciliation of
competition and collaboration in the context of internal tendering which may jeopardise
effective knowledge sharing and circulation.
A second qualification of the trend towards more learning organisations is found in the
parallel tendency of more standardisation and formalisation that is occurring in different
industries. Indeed, despite the observed introduction, or in case of IT R&D the observed
robustness, of organisational practices that stimulate knowledge exchange and the combination of different types of knowledge in view of innovation, there is a simultaneous
trend towards further rationalisation, standardisation and knowledge codification
through the introduction of bureaucratic processes or knowledge codifying technologies.
In the food processing, the software production, customer services and the clothing companies, the formalisation and rationalisation of procedures, knowledge, job content and
relationships are reported. It seems that knowledge codification and knowledge creation
are closely related and occur simultaneously, but may also counteract each other. The
question to which side of the scale the organisation ultimately dips, to a more learning
oriented organisation or to a more Tayloristic organisation mainly built on codified
knowledge, will be the result of a combination of a wide range of intervening and contextual factors and of the history of the firm. In the WORKS case studies, examples of both
outcomes have been found. To investigate trends and evolutions more in depth, would
require longitudinal research at workplace level. In any case it seems clear that the balance between the two models is likely to be decisive for the future position in the value
chain of the companies and their employees.
3.4
The learning organisation in Europe?
The evolution of the incidence and development of the ‘learning organisation’ is obviously not a new topic in organisational studies but - on the contrary - highly-investigated
both in case studies and in surveys, both economy-wide and in specific industries. In
organisation surveys specifically, work organisation is a core topic, and the division of
labour and forms of organisational innovation are studied systematically by asking
employers, cross-sectional or in panel surveys, what the main principles and features of
their work organisation are and - more importantly - what new practices are introduced
and why. An increased need to adapt to highly changing corporate environments, including both the competitive position and the local labour market situation, and the
impact of technological innovation are investigated as main drivers for such organisational changes. Organisational change is investigated under different forms and labels,
such as new forms of work organisation, new production concepts, teamwork, high performance workplaces and the learning organisation. In the frame of this report it is not
possible to give full account of this rich and long-standing research tradition in organisation and labour studies. As it is a core dimension of organisational flexibility, functional
flexibility, and how it appears in the quantitative and qualitative research of WORKS, is
also treated in the thematic report on flexibility of this WORKS series (Flecker et al., 2008).
In addition, the effects of technological innovation, and more precisely of the implementation of value chain related technologies, on work organisation are discussed extensively
in the WORKS report on ‘Employers use of technologies’ (Greenan et al., 2009).
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CHAPTER 3
In this report we want to include some of the key findings of recent organisational and
employee surveys in Europe on the incidence and characteristics of (varieties of) the
learning organisation. While the WORKS case studies clearly showed that value chain
restructuring may lead to uneven knowledge distribution along the chain, more precisely
leading to increased knowledge-intensity for one part of the companies, we assumed that
organisations might need to adapt their work organisation to manage this increased
knowledge-intensity and to facilitate knowledge creation and circulation. But the case
studies show that there are some clear countertendencies, related to more general processes of growing standardisation and formalisation of work processes and to contradictory pressures, such as the speeding up of business processes and the shortened time to
market of product innovation. The lack of a longitudinal perspective in the case study
research leaves us with an open question to what model the organisations under investigation will ultimately evolve, but longitudinal and more large-scale research on changes
in work organisation might shed some light on the main trends in organisational innovation in Europe during the recent past. Such general trends may be indicative for possible
future trends and they may also partially reflect changes in organisations related to
organisational restructuring and to the transformation of value chains, since these are
obviously not new phenomena.
A first possible source for more general insights in organisational change comes from
organisation and establishment surveys that are reasonably well-established in a number
of EU countries (see http://www.worksproject.be/entrypage.php for a comprehensive
overview and analysis). However, these surveys differ so considerably in sampling
design, scale, scope, research method, longitudinal cycle and regularity, thematic
approach, questions used etc. that a comparative result of the collected data at the EU
level is impossible. A systematic analysis of the results of the leading organisation surveys
in Europe on this topic, undertaken in the quantitative research part of WORKS, may
nevertheless clarify some general patterns (Ramioul & Huys, 2007).
Figure 3.1
Organisations that have implemented new or significantly changed organisational structures
according to innovation activity
80
71
69
70
61
60
54
50
53
52
52
52
51
51
47
46
44
42
40
36
30
30
31
29
26
19
20
21
22
22
22
20
22
18
15
12
10
3
N.A.
0
IE
DE
LU
AT
PT
UK
ES
IT
SE
Organisations with innovation activity
Source:
BE
NO
EL
FI
NL
DK
Organisations without innovation activity
European Commission (2004), own tabulation
50
FR
THE ORGANISATIONAL IMPLICATIONS
A first striking evidence results from the Community Innovation Survey and shows the
relationship between innovation and organisational change. In this survey, the growing
awareness that product and process innovation often require organisational innovations
in order to be effective, led to the inclusion of specific questions on this subject in the survey. These questions deal with changes in strategy, management, organisation, marketing
and finally in aesthetic changes. Figure 3.1 presents the results on the issue of organisational changes, to be understood as the implementation of ‘new or significant changes in
organisational structures’ during the period 1998-2000.
The figure shows very high country differences in the level of organisational change.
The figure also shows that organisations with innovation activity were more likely to
engage in organisational change than organisations without innovation activity and this
for each country for which data are available. As such, organisations with innovation
activity are usually twice as likely as those without innovation activity to change their
organisational structures. ‘This could support the view that the complexity of the innovation process is such that the introduction of new products or the implementation of new
processes is also likely to lead to organisational change and vice versa’ (European Commission, 2004; cited in Ramioul & Huys, 2007). Although it is not possible to draw conclusions about the direction of the relationship or about the causality between innovation
and organisational change, so far the observed relationship seems to be encouraging.
However, more detailed research from national organisation surveys on the incidence
and, more importantly, on the characteristics of ‘changing organisational structures’ all
show a much more sobering picture. Organisation surveys investigating the incidence of
teamwork in Belgium, France and the UK all conclude on a higher incidence of the ‘lean
model’ of teamwork rather than of the so-called self-directing teams, where the learning
opportunities can be regarded as much more constituent. In general, ‘teamwork’ as a
generic concept is highly-reported by the respondents of the organisation surveys, but
when specifying the underlying key indicators of teamwork, the picture should definitely
be qualified: teamwork models that stimulate knowledge exchange and learning need to
be characterised by specific structural features, such as job rotation, decentralisation of
decision-making, a shift from task specialisation to task diversification, integration of
functions, a reduction in the number of hierarchical levels, the replacement of vertical by
horizontal communication channels, etc. Such models of teamwork remain scarce and, in
addition: ‘the diffusion of new forms of work organisation has been rather muted in
recent years, as is evident from the stability in the incidence of practices as teamworking,
multi-skilling or problem-solving groups (Kersley et al., 2006; cited in Ramioul & Huys,
2007: 15).
The ‘lean production model’, in contrast, seems to prevail as form of organisational
innovation, as can be illustrated with the French RESPONSE survey: ‘The most globalised
and competitive French organisations are more oriented towards a centralised leanproduction model. This combines an innovative management and work organisation with
systematic work prescription and controls. The autonomy granted to employees in order
to mobilise their individual and collective intelligence and creativity is controlled by management not only through the operation of strict working rules, controls and incentive
remuneration packages, but also through the threat of mass unemployment’ (Ramioul &
Huys, 2007: 16).
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CHAPTER 3
This consistent finding from organisation surveys of the dominance of the lean production teamwork model, rather than the learning organisation teamwork model, is relevant and also coherent with the WORKS case study findings in the sense that both clearly
point at a tension between the requirement of a learning environment, aimed at knowledge innovation, and more management control and formalisation, which are to an
important extent induced by market pressures but may also be related to organisational
changes implied by different forms of value chain restructuring. Based on the results from
organisation surveys, the balance to date is not likely to dip towards the learning organisation as a dominant model and the mentioned tensions and contradictions seem not to be
settled to the benefit of an innovative working environment.
Next to information on work organisation practices and developments that can be
derived from organisational surveys, obviously the employees themselves are a key
source for information about the extent to which their jobs allow them to learn new things
or not, about the autonomy they have to perform their tasks or the hierarchy that they
have to follow and the collaborative environment that is available or lacking at the workplace. In the EWCS, information on the incidence of some characteristics of the learning
organisation can be derived by constructing synthetic indicators combining different variables related to quality of work. This is done by Greenan et al. in their analyses of the different waves of the EWCS (2007). Indeed, the EWCS includes information on task complexity, job rotation, quality standards, problem solving and learning, assistance from
colleagues, discretion in how the work is carried out and in time allocation. All these
dimensions relate to how work is co-ordinated and how information is processed, reflecting the content of job in terms of learning and complexity. These indicators are combined in a synthetic indicator, labelled by the authors as ‘complex work’ (Greenan et al.,
2007: 6). The authors analyse complexity, discretion in time allocation and learning as key
dimensions of work organisations. Since the outcome of these analyses is dealt with
extensively in other WORKS reports, we confine here to the main results relevant in the
frame of the report at hand. One striking conclusion of this study is the fact that work
intensity as induced by technical constraints, next to market constraints, is still very much
a reality in EU firms. ‘Technical’ constraints include not only automatic speed of machines
or movements of products and the existence of numerical production targets, but also the
dependency on the work done by colleagues and the pressure on the pace of work coming
from the hierarchical boss or manager (Greenan et al., 2007: 38). This is particularly observed in the countries of the EU with more developed economies compared to the transition economy countries. In addition, also market constraints are highest in Northern and
Western European countries. In the same report, the authors observe that on average in
the EU-15, there was a significant decrease of work complexity between 1995 and 2005,
meaning that employees are less able to choose or change the order of tasks and methods
of work that their jobs involve to a lesser degree solving unforeseen problems, complex
tasks or learning opportunities. Especially the latter three indicators are key features of a
learning organisation.
Also these observations may support the conclusion that, overall, organisations in the
EU are rather evolving towards less than towards more learning job structures and work
environments. The observed evolutions from both organisation and employee surveys
may or may not be related to the way firms change their work organisations in the context
of a particular restructuring or, more generally, respond to changes in the corporate envi-
52
THE ORGANISATIONAL IMPLICATIONS
ronment related to globalisation. But these survey results can be confronted with the
‘unsettled’ organisational outcome in terms of more learning and autonomy versus more
control and less complexity as was observed in some WORKS cases. This conclusion is
important in that it can raise concerns about the longer-term evolution of the innovation
capacities of firms, which can be regarded as crucial in the intensified globalised economic
environment. This makes the illustrations of companies where opportunities for more
learning can be detected, all the more important.
53
4
Changes in skills
4.1
Assumptions and research questions
As described in the first section, the restructuring of value chains may lead to a reallocation of knowledge along the chain, with an uneven distribution of the standardised
knowledge on the one hand and the more complex bodies of knowledge on the other. In
the second section, different tensions and conflicting requirements with respect to the
knowledge management (the creation, codification and transfer of knowledge) have been
revealed as well as the organisational solutions that the companies implement as a response. Obviously, all these developments will have different effects on the required skills
of the employees involved. In this third section, the focus is particularly on the changes in
these required skills implied by value chain restructuring and the related organisational
changes. The changes in skills that can directly be related to technological innovations are
treated extensively in the report on ‘Employers’ use of technologies and the impact on
organisational structure’ (Greenan et al., 2009).
Explaining changes in skills is not obvious because of the difficulty to disentangle and
observe different causing and intervening variables. More generally, it is difficult to isolate the effects on required skills induced by changes in the organisation and in jobs, from
changes related to supply side developments, such as for example the availability or
shortage of qualified employees on the labour market (Ramioul, 2006: 101). Another difficulty relates to the fact that changing skill requirements, whether upskilling or deskilling
or the emergence of new skill needs, can be caused by different, sometimes contradictory,
but mostly highly-interconnected mechanisms and drivers: the introduction of new technologies, incremental or fundamental product innovations or changes in the specifications
of products and services (such as can be found in the food industry), evolutions on product markets, changes in the task pool of organisations related to value chain restructuring
(out- and insourcing, relocation, …) and the effects on all these on the technical division of
labour and the design of jobs. In reality, all these changes often occur simultaneously and
are closely related. Their respective effects cannot easily be unpacked, even not in case
study research including in-depth interviews.
Clearly, research on changes in skills can be done using different methods and research
designs, including both quantitative and qualitative research, both with employees,
reporting on their subjective assessment and experiences of changes in the job requirements, and with employers, reflecting the management perspective of required skills in a
changing corporate environment. The aim in this report is to confine, where possible, the
analysis to changes in required skills, qualifications and competences as they are reported
by the WORKS case study respondents, both in the organisational case studies (primarily
focused at managers) and in the occupational case studies (employees). These respon-
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CHAPTER 4
dents were asked about changes in requirements of skills, qualifications and competences
that are related to the investigated restructuring events and the company’s strategies and
organisational changes accompanying these restructurings. With this focus in mind, some
plausible mechanisms of skill change related to value chain restructuring can be discerned
and some general patterns emerge from the analysis. Before turning to the case study
results, these assumptions on the direction of skill developments are elaborated.
A first possible mechanism of skill change is based on the observation that the outsourcing or relocation of activities is typically preceded by the documentation and standardisation of work processes, procedures, day-to-day practices and routines, in other
words by a codification of the knowledge on the labour process. This codification may
result in a deskilling of the tasks involved in the restructuring because of the fact that it
often leads to changes in the division of labour of the business function within and
beyond the organisation. Codification and related deskilling will primarily concern the
low-added value activities that are externalised, but might also affect in its wake the tasks
belonging to the business function in restructuring that do not disappear from the site but
are reorganised at one go.
Related to this, deskilling may also result from the fragmentation of knowledge along
the chain, and hence from the loss of collective knowledge or craftsmanship based on a
comprehensive and systemic knowledge about all the stages of the production process
and the different parts of the organisation, as illustrated earlier. This is especially a risk if
value chain lengthening is not accompanied by adequate measures to close the information loop and to integrate the knowledge at the level of the integral production process,
for instance by implementing effective communication and knowledge-sharing tools and
procedures or by installing a specific co-ordination or liaison function. In addition, the
distance between employees and between activities, created as a result of value chain
lengthening, may also imply that the tacit dimension of knowledge may no longer be
available to secure a smooth or seamless production process.
A third mechanism of deskilling may come from the formalisation and proceduralisation that accompany value chain restructuring or that can be discerned as more general
trends: the organisation of work over distance, the scaling-up of the firm due to mergers
and acquisitions implying increased bureaucratisation, the implementation of ICT, … This
formalisation is a process of knowledge codification as such, but it may also be prompted
by the need to reduce uncertainty on the quantity and quality of the performed work. In
particular in situations of distance work, new and sophisticated tools and procedures may
be introduced to monitor the work, thus limiting the opportunities employees have to use
and develop their skills.
On the other hand, it is possible to hypothesise on some mechanisms of upskilling that
might occur complementary or in contrast to the deskilling mechanisms. A first mechanism results from the simple fact that the elementary tasks and lower qualified jobs disappear from the organisation, which was elaborated earlier as skill-biased organisational
change. This is not only a purely quantitative effect and neither can it be confined to the
reduced demand for unskilled or semi-skilled work. The externalisation of unqualified
jobs from the site might also lead to changes in the composition and bundling of the
remaining tasks, the technical division of labour, with an increasing relative importance of
complex tasks of the business function in restructuring and the reallocation of the remaining work force to these. A second mechanism of upskilling may occur when re-
56
CHANGES IN SKILLS
structuring of value chains implies relocation of lower skilled (segments of) business
functions and a related shift of the core business of the company to more complex and
knowledge-intensive business functions and activities, such as a shift from a production
unit to a R&D or logistics company. In this case, a more comprehensive upskilling of the
whole organisation may be implied. Third, upskilling may result from the introduction of
ICT that support the restructured business function and firms. This issue is elaborated
and analysed in depth in the WORKS report ‘Employers’ use of technology and the
impact on organisational structure’ (Greenan et al., 2009) and will therefore only be discussed briefly here. Finally, access to new knowledge and learning opportunities may also
occur when activities (and employees) are shifted to other companies in the chain. This
may lead to the opening up of new training opportunities and skill development strategies and the generation of new career trajectories.
Next to upskilling and deskilling, the need for new skills, qualifications and competences related to the organisational and technological changes can be assumed. These
relate to the introduction of new organisational practices which were described in the
previous sections, but also to the introduction of new tools and technology infrastructures
that often concur with the organisational restructuring. Such new requirements may concern different types of skills. The skills classification developed by O*Net may be of inspiration here and include the following types, each of them covering different subclasses
(http://online.onetcenter.org/skills, 2008):
 basic skills: developed capacities that facilitate learning or the more rapid acquisition of
knowledge (reading, listening, speaking, writing, etc.);
 complex problem solving skills: developed capacities used to solve novel, ill-defined
problems in complex real-world settings;
 resource management skills: developed capacities used to allocate resources efficiently
(financial, material, human resources, time management);
 social skills: developed capacities used to work with people to achieve goals (co-ordination, instruction, negotiation, persuasion, service orientation, social perceptiveness);
 systems skills; developed capacities to understand, monitor and improve socio-technical systems (judgement and decision-making, system analysis, system evaluation);
 technical skills: developed capacities used to design, set-up, operate and correct malfunctions involving application of machines or technical systems (installation, maintenance, operation, control, repairing, ...).
Both in the WORKS organisational case studies and occupational case studies, several
indications can be found of such new skill requirements.
4.2
The case study results
4.2.1
The clothing industry: moving up the value chain
In the clothing industry, the relocation of mass production activities and the reorientation
of companies to more added-value activities, such as design, retail and logistics is not a
recent development but already going on for almost half a century. It is obvious that this
evolution has generally led to an upgrading of the companies that were able to survive in
the global competitive environment.
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CHAPTER 4
The externalisation and relocation of the most Tayloristic parts of the value chain, combined with the evolution towards more complex products, considerable shorter innovation cycles and a multiplication of collections, led to an overall upskilling of the remaining
workplaces in the investigated firms. Restructurings implying the integration of adjacent
steps of the value chain or implying putting in place systems for integration and control of
the flows of goods and information, additionally contribute to changes in the knowledge
base of these companies. Hence, a general upskilling of the jobs in the organisations situated at these higher ends of the value chains can to an important extent be explained by a
shift to or reinforcement of more knowledge-intensive business functions and activities.
Earlier we also referred to the general evolution in the employment of this sector
throughout the EU during the last decades, with a combination of considerable job losses
in blue-collar production work and a growing relative share of employment related to
R&D and logistics (Geurts et al., 2007). But also at the level of individual workplaces these
fundamental changes in the activities of the firms can be observed. In some of the case
study companies, the externalisation of the production activities and of the simpler design
tasks implied a recomposition of the remaining tasks of these business functions, respectively production and design, with more complex tasks as a result. As described earlier, in
one case this led to a considerable upgrading of former production stitchers to prototype
stitchers, but other examples include the enlargement of tasks with quality control or the
introduction of functional flexibility. At the lower end of the value chain, the picture is
definitely not the same. The companies from the case study research that are in this position report the opposite: a loss of knowledge on the core of the tailor profession.
When looking more closely at the designers, the tighter integration of the design function with the marketing and sales function and the implementation of feedback-loops
from sales, whether functionally or technically, clearly broadens their skills spectrum.
Traditionally the core competence of this occupational group relies in the first place on
their aesthetic and creative skills and on a ‘feeling’ to understand what the customer
wants and how society changes. Expertise is mainly reached through a long-standing
working experience, implying typically an upward career trajectory to more exclusive
fashion companies. The broadening of these core skills and experiences results from the
requirements induced by task multiplication and the increased speed of work, the
speeded-up business processes and increased product varieties. These new requirements
may, however, push aside the creative process and required time for reflection and
imagination, and put more on the forefront the capacity to process and integrate a lot of
diverse types of data and information in a short time and under time pressure. The availability of objective, commercial data providing direct feedback on their designs may for
instance replace the subjective ‘understanding’ of the customer. Instead of being creative,
designers need to acquire the skills and competences that fit the competitive economic
and technical environment. In the first place, this implies the skills to interpret commercial
data and to be cost-sensitive in their designs. Secondly, designers more and more have to
be capable to understand technical aspects of new fabrics and new sewing techniques.
Thirdly, they need basic skills to work with IT - both CAD as ERP systems. Finally, the
growing pressure on quick and efficient design processes implies the need of more systematic and intensive communication with the sales department and thus - indirectly with the customer, which might also require more language and other communication
skills. In terms of the skills typology, it appears that designers more and more need ‘sys-
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CHANGES IN SKILLS
tem skills’ that should allow them to have an insight in the process from design to production to marketing to sales, including the capacity to take into consideration the different logics and rationales of these business processes. Particularly in work organisations
where co-ordination tasks emerge as a result of the lengthening of the value chain and the
integration of the information flows, specific co-ordination and management skills are put
forward for these employees that are explicitly involved in this co-ordination function.
Hence, we observe a shift from basic skills underpinning the creative design process to a
growing importance of problem solving, technical and social skills, sometimes also including resource management skills and system skills.
We may conclude that the main trend for the employees in the companies in restructuring is not simply upskilling or deskilling. Upskilling may result from a shift to more
complex business functions and activities, the growing integration of information flows,
the speeding-up of business processes and the increased complexity of tasks requiring to
combine, process and integrate in a short time different types of data and content. On the
other hand and at the same time, the tighter control and standardisation of the work process, that often accompany the organisational changes, and the codification of knowledge
related to the introduction of CAD and ERP systems, may jeopardise the creative and
innovative skills that are at the core of the design occupation. In addition, a more prominent role for non-design skills is observed, which some designers see as a threat to their
profession. The combination of these tendencies seems to point at what may be called
‘skill intensification’ rather than a ‘straightforward’ up- or deskilling.
4.2.2
Software development: despite formalisation no clear deskilling
A fundamental characteristic of the IT professional is the requirement for continuous
learning and knowledge updating, closely related to the development of new software
and programming languages. A major component of their skills ‘portfolio’ includes technical and complex problem-solving skills. The evolution of the required skills of this
occupational group should be defined as more general and not necessarily related to particular organisational changes following value chain restructuring. Such more general
developments include the growing standardisation of knowledge and methods in software development, the decreasing importance of coding and programming and of software integration, customisation, end-user programming and project management. The
standardisation of the customer relationship and the delivered services, such as is manifested in the standard use of Service Level Agreements, further contributes to the codification of some parts of the software programming process.
It may well be assumed that all these mechanisms that are likely to induce skill
changes, will be triggered and reinforced in an organisational context of restructuring
such as was observed in the case studies: on the one hand the outsourcing or relocation of
the more standardised parts of the software programming, and hence the moving up the
value chain for the remaining company activities, and on the other hand the bureaucratisation effects of mergers and acquisitions implying the formalisation of working procedures, but also possible new learning and career opportunities.
First, it seems - again - not obvious to explain the skill changes of software programmers in terms of either upskilling or deskilling. The case studies show that this highly
depends on the position of the company in the value chain and in the broader company
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CHAPTER 4
network of all the firms that participate in the tendering processes. In case the companies
succeed in acquiring a specific expertise and building up a local knowledge-base
strengthening their competitive position, it will be more easy to further develop this
knowledge-base through the execution of complex work that is assigned to them. In such
an organisational context, the case studies show a growing importance of e.g. software
programming and complex problem solving capacities in the core competences. In case a
software company is not successful in developing specific expertise as a competitive asset,
it might well be that the organisation quickly slides down the value chain and hence is
more condemned to execute to more simpler work, with less learning opportunities and a
further eroding of their knowledge-base as a likely result.
Second, the described trends towards global sourcing, (internal) tendering practices,
increased and intensified collaboration with other firms and the customer, put several
new skills on the forefront, as is also well-summarised in the WORKS report ‘How restructuring is changing occupations? Case study evidence from knowledge-intensive,
manufacturing and service occupations’ (Valenduc, Vendramin, Krings & Nierling, 2008:
88ff). Besides a continued importance of keeping the core technical skills updated, the case
studies especially show a growing importance of skills related to project management
organisation which include in particular resource management skills such as planning
skills, but also the management of financial and human resources and time management.
Working in project teams also implies the need for social skills: working in a team,
leadership skills, and communication and negotiation competences. On the other hand,
new skill requirements are related to the growing importance of customer-orientation,
such as the need to be (technically) familiar with the business domain of the customer. For
both dimensions (project management and customer orientation) the need for a wide
range of technical and social skills is reported, depending on the actual organisational
context and its geographical scale. As for the latter, language skills, cultural sensitivity,
the flexibility to be available during atypical hours to bridge time zones, the willingness to
travel, are obvious requirements for those firms and employees that are operating at an
international level.
Again, despite the fact that technical skills remain utterly important, we may conclude
on an evolution towards a more prominent need for skills that are in principle not at the
core of the occupation, that are fundamentally related to the structural requirement of
collaboration beyond the proper team and company and that are combined with an increasing complexity of the core skills related to the externalisation of the simpler parts of
the work and the collaboration with other firms and customers.
4.2.3
Research and development in IT: combining divergent skill requirements
As described, the growing importance of applied and commercial research may urge the
R&D companies to create specific marketing and sales functions, develop separate project
management careers, set up matrix organisations or assign these tasks to the technical
researchers. Since a total split between management/commercial jobs and technical jobs is
often not possible because of the requirement of technical knowledge for the sales staff, it
is to be expected that most researchers will be confronted with requirements to better
understand markets and customers and to acquire commercial expertise as well. Furthermore, basic and applied research pose as such different skill requirements related to the
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CHANGES IN SKILLS
different time schedules of both types of research, the often more clearly articulated
expected outcome of applied research, the need to comply to requirements of intermediate reporting and documenting the work, the need to communicate and collaborate with
colleagues within the organisation and beyond and with the sales department etc. These
new skills requirements not only lead to a broadening of the skills spectrum and to a
moving away from the individualistic and creative scientist ‘pur sang’, but the employees
are also expected to be able to combine the different requirements related to the different
kinds of research.
Hence, once again we do not see a straightforward evolution in terms of upskilling or
deskilling but rather an intensification of skills related to the necessary combination and
integration of diverse and sometimes conflicting competences. The most prominent new
requirements can be classified under resource management skills and social skills.
4.2.4
The food sector: deskilling of blue-collar work
Similarly as in the other sectors, the value chain restructuring in the food processing
industry is accompanied with changes in required skills and qualifications in various
directions: upskilling, deskilling, new skills, and retaining existing skills and qualification
requirements. Not all changes can directly be linked to the process of value chain restructuring, since a number of the reorganisation and automation processes would or
could have been implemented without the restructuring. Nevertheless, it can be observed
that value chain restructuring too may result in changing skills and qualification requirements. From the previous sections, it became clear that the relation between knowledge
and restructuring is a ‘double-bind’ situation: on the one hand restructuring goes (often)
hand in hand with technological developments, innovation and quality improvement,
which has an effect on the type of skills and competences needed. On the other hand, the
need for these specific skills (including experience-based knowledge) and the availability
of these skills on regional or local labour markets sets limits to the direction and location
of the restructuring strategies.
In general, the following pattern can be discerned: formal deskilling of blue-collar skills
and lower management tasks on the one hand, and formal upskilling of middle and
higher management tasks, and the development of new skills (R&D) on the other. One
illustration of this trend was found in the case of a Danish slaughterhouse Meat Inc. This
large firm is an exporter of pig meat and it consists of more than twenty slaughterhouses
and deboning plants. Production in this factory was recently automated and centralised at
a large new plant in Denmark. Due to theses changes, the work changed profoundly:
work became more standardised and very Taylorised, with a detailed description of every
operation. This led to a loss of specific manual skills and a clear deskilling except for a
selected group of the workers who saw their technical skills upgraded as a result of additional responsibilities of small machine repair. As a result of the overall standardisation,
no formal qualification requirements were put forward in the recruitments for the new
plant (Gorm Hansen, 2007).
The Bulgarian Beer case (production) indicates how the outsourcing of the production
function from the Benelux to Bulgaria had a substantial effect on the skills and qualification requirements of both managers and blue-collar workers in the Bulgarian company.
The outsourcing has led to a transfer of new technologies, a new (western) management
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culture, and a new language (English), which has stimulated training, learning facilities
and new formal qualifications. However, the restructuring had a different impact on
managers and blue-collar workers. Blue-collar workers are confronted with the automation and the standardisation and formalisation of reporting procedures. They perceive
these developments as undermining their experience-based knowledge and autonomy,
and as a result the reduction of career development. Middle and higher managers feel
challenged by the transfer of new knowledge from the Benelux company, which results in
an enlargement of tasks and qualifications (software knowledge to control product quality; new language skills, etc.) and they perceive these developments as an opportunity for
career mobility along the value chain. The Benelux beer case reported an ‘obvious shift
towards simpler and more repetitive tasks and a much lower required skill and educational profile’ (De Bruyn & Ramioul, 2007b: 13).
These trends are reflected in different training and education facilities and/or the use
of these facilities by blue-collar workers and managers. In the Benelux case the formal
deskilling was reflected in the shift from a one year on-the-job-training to a four weeks
training programme for those workers who will be taking over the relocated work, which
was assessed as sufficient by the management. This shift seems to be driven by a particular interpretation of the work by the management, but it is ‘not a reflection of the actual
needed skills and qualifications to do the job’ (De Bruyn & Ramioul, 2007b: 12). The same
report indicates an interesting aspect of the development of the experienced-based knowledge. In the former situation the clerical workers not only had more than one year on-thejob-training, but each worker ‘developed systems, procedures and tools to make the work
more efficient and easier in the course of the years they had worked in the unit’ (p. 12).
The interesting question is whether production of food products (in a value chain) still
needs this kind of experienced-based knowledge and such an input in incremental innovation. Some of the case studies seem to confirm the relevance of this type of knowledge,
in particular to secure the necessary product quality, and more or less state a certain misconception from the management of the required skills. The case of the Italian frozen
vegetables Natural Delicacy illustrates this point. In this case the outsourcing of some
production functions to a lower qualified labour force resulted in a worsening product
quality: ‘the management has expressed dissatisfaction over the outcome of the outsourcing process … (which) … seems to have produced as an ‘unexpected consequence’, a
worsening quality of the products’ (Pedaci, 2007a: 7). However, the overall strategy with
respect to blue-collar work goes in the direction of more general (repetitive) and more
formal codified tasks at the expense of more specialised, experience-based knowledge.
The upskilling and formalisation of qualifications has a positive effect on the middle
and higher management career opportunities and less on blue-collar or lower clerical
career development (due to the formal deskilling trend). An interesting phenomenon in
this context is how this shift to formal (higher) qualification and competence requirements
may destroy old career pathways as illustrated in the several brewery cases where the old
‘patronage model’ or career trajectories based on experience have been replaced by qualification-driven career lines or promotions based on formal education.
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CHANGES IN SKILLS
4.2.5
IT in public administration: upskilling but less discretion
The restructuring of the public administration sector is accompanied by an increasing
standardisation of certain tasks and the development of new tasks and task enlargement.
Required skills and qualifications have changed accordingly. In the public administration
sector, we can observe different management strategies with respect to the
(re)organisation of skills, competences and knowledge in the domain of services. In the
front offices we can observe an upskilling trend: in particular the need for ICT knowledge,
communication skills (with customers, but also with colleagues (other specialists), and
commercial (next to service) competences. The application of IT programmes has certainly
increased standardisation of activities and as a result, it has reduced the autonomy of
employees (as was illustrated in the Dutch IT case). In this sense, this trend can be qualified as deskilling. However, at the same the communication and commercial competences
are more important, as well as knowledge on the domain of the different services the
employees have to master (as clearly indicated in the UK and Belgium cases). Back-office
task undergo similar changes: standardisation and job-enlargement at the same time.
As stated before, ICT has become an important tool for public administration and, as a
result, the further development of existing ICT activities has been outsourced to specialised external providers. The externalisation is accompanied with an increasing standardisation of applied software programs and website designs, based on detailed templates
and generalised systems. The externalisation has two different effects on skills and qualifications. For the ICT providers, upskilling effects can be observed, in particular where
software developers have to combine technical knowledge with sector-specific knowledge
(including skills to communicate between both worlds). However, the development of
general templates and systems has simultaneously resulted in a decreasing autonomy of
software developers to build software or to design websites from scratch. This was wellillustrated in the UK City Council case study (Dahlman, 2007a: 12). For the work at the
public administration level, the outsourcing and development of ICT has resulted in
changes in required skills and qualifications. For the remaining IT activities at the public
administration level, the externalisation of ICT development has resulted in an ‘increased
standardisation of work processes and a more structured and formalised way of working’
(ibid.). The application of standardised ICT systems and templates has resulted on the one
hand in a decrease of the discretion of civil servants at the level of implementation and
services to apply legal rules in specific cases. This effect of standardisation and application
of ICT systems is well-known from literature and the case studies confirm these outcomes.
This reduction of autonomy can be interpreted as deskilling (civil servants need less innovative and communicative skills to apply the rules). However at the same time a trend of
task enlargement can be observed as well. Where in former days civil servants were more
or less specialists in a particular service domain, the trend nowadays is to enlarge the
domain with a variety of different services. This has an upskilling effect.
4.2.6
Customer services in the public sector: growing importance of communication
skills
To understand the effects of restructuring on skills in the customer services of the public
sector, it is useful to distinguish the different types of skills that are required from the
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employees who perform the tasks related to this business function. As Valenduc,
Vendramin, Krings and Nierling (2008: 145) point out, on the one hand there are the
technical or administrative skills related to the content of the customer service, on the
other hand, there are the communication skills that are at the core of service relationship.
Both have to be acknowledged when investigating the impact of value chain
restructuring.
In general, it can be observed that for the customer service in the public sector - as
probably also in private companies - formal qualifications at the entry of these jobs are of
a minor importance. When considering the characteristics of the work force that is attracted to these jobs, these include students and people combining this work with care
work. Although these employees are not specifically oriented to making career in these
jobs, feelings of overqualification are often reported. Of course, knowledge about the
‘technical’ content of the service has to be acquired, but as this is highly company specific
in most cases, the skills to be familiar with the specific services will mostly be learned in
the company. As for the communication skills, social skills and the competences to be
adaptable to variable customer demands and to control the emotional appeal which is
inherent of the social interaction involved, these are mostly defined as a combination of
personal traits and experience. Overall, formal training opportunities are - as a rule rather scarce or restricted to entry and most learning is on the job or from colleagues.
There is a lot of recent literature and research on the skills required for service work, for
instance in attempts to better describe and classify these specific skills and to better
understand emotional skills in general. In the report at hand, the focus is on the observed
skill changes in relation to restructuring.
As in the other business services and sectors investigated, the changes in required skills
can be explained by different, concurring trends and mechanisms. First, there are the
changes in the work organisation, that, in this business function specifically, we described
by a quite clear, and sometimes drastic, segmentation of the two types of services. Second,
ICT play a key role in the changing skill requirement in all cases.
Based on the ‘knowledge-based’ segmentation of the customer service function, separating the more standardised from the more complex services, one can assume that the
restructurings investigated will contribute to a polarisation of skill developments. When
those services that require a more personalised customer approach are isolated, a shift in
balance to more contact-related skills is likely to occur, while for the more standardised
(telephone) services, a ‘displacement of contact-related skills to communication skills’ can
be observed (Flecker et al., 2008: 122). While the focus on more complex customer services
may lead to upskilling, the opposite is likely to happen with the standardised customer
services: the narrowing of the tasks, the intensive use of scripts and procedures to handle
the customer requests and the kind of services to be delivered, all have deskilling effects.
The cases confirm such a polarisation, for instance in the Austrian City Council case. The
work at the call centres is highly-standardised, based on strict guidelines and electronic
monitoring and surveillance (Schönauer, 2007: 8-9). ICT-based tools and data processing
systems play an important role in the standardisation. At the call centres, the day-to-day
skills are more important than external required formal qualifications. Employees basically use a network-applied knowledge base. They learn on-the-job in a training of two
months on average. This type of work attracts a particular segment of the labour market:
students or young people in secondary education who combine work with study, women
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CHANGES IN SKILLS
who combine part-time work with care, and older workers who combine (pre)retirement
with paid work. The Austrian case illustrate as well that the educational level of many of
the employees at the call centre is higher than the work requires. On the other hand, there
is a clear trend to develop new and more integrated services in ‘service centres’. This
trend may also imply the development of teamwork, as illustrated earlier. Communication and co-ordination have become relevant additional skills in these team-based organisations. In the Dutch telecom case CSN, an insourced call centre provider, the contact
work became gradually more complex and diversified (involving ‘cross- and up-selling’)
and service standards were developed. The agents had therefore to be able to enhance
their marketing and commercial skills and to develop more advisory competences
(Trommel, Bannink & Hoogenboom, 2007: 18).
The role of ICT deserves particular attention. First, it is clear from all cases that ICT
play a role in the business function as a whole and hence has a become an essential tool
for all actors involved: frontline workers, call centre operators, employees interacting
directly with the customer, and the customer him- or herself. Secondly, the effects are
mixed. On the one hand, it is obvious that ICT play a key role in the codification of the
knowledge related to the documentation, standardisation and digitisation of different
aspects of the service work, notably of the technical, content aspects. Autodial systems
and automatic enrolling scripts obviously also lead to more monitoring, control and less
autonomy for the employees. Hence, ICT limit their learning opportunities. On the other
hand it should be acknowledged that ICT may often serve as an important knowledgesharing tool between the different employee categories that supply the service. Such
‘knowledge databases’ have become crucial for the initial training and for the future
learning opportunities of the employees. In the Swedish police case, where first line crime
reporting and follow up was organised in a specialised call centre, the employees developed such a database in order to share experiences on how to deal adequately with different kinds of crimes and different kinds of customers. This way the knowledge of ‘crisis’
interventions was shared and the caring dimension of the service could gradually be
improved. Finally, the growing digitisation of the technical and content-related aspects of
the service work, implying that the technical content is included in the databases, results
in the fact that the communication and interaction with the customer receives more attention in the training provided by the company. This key role of ICT has different effects on
required skills. First, the employees have to learn how to use these technologies as a
source and a tool to answer the customer questions; second they induce an increasing
relative importance of the interactive and communicative skills for customer service work.
Third, it became clear that the general efficiency increase and work intensification in this
service work also implies that employees increasingly have to be able to combine two
totally different types of tasks at a high-speed: to handle the ICT system and to talk (and
listen) to customers. As formulated by Valenduc et al.: ‘the customer service is ‘squeezed
between two trends: the increasing need for conceptualisation of the service relationship
centred on the conceptual chain of problem identification - diagnostics - solution, and an
increasing pressure for operational and timely delivery of the service (Cerf & Falzon,
2005: 61-62, cited in Valenduc, Vendramin, Krings & Nierling, 2008: 145). These conflicting
pressures can be regarded as a direct reflection of the overall company policy in public
services where both customer-orientation and (cost-)efficiency have to be combined.
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4.3
Conclusions
As assumed, there is no clear pattern in the evolution of skills, qualifications and competences related to value chain restructuring. One important factor is the fact that the impact
of restructuring can rarely be isolated from skill effects from other, mostly concurring,
developments such as product innovations and changes in the technological infrastructure or in the economic environment of the investigated organisations. As a result, the
picture is quite mixed, especially when the different nodes or companies composing the
value chain are included in the analysis. Given the specific selection of the case studies,
with a majority of firms situated at the higher ends of the value chain, the results seem
nevertheless to point at upskilling trends overall, related to the growing knowledgeintensity of the activities performed, the importance of product innovation and the introduction of (organisational) technologies to co-ordinate work and production flows. The
most illustrative cases of companies more downstream the value chain, could be found in
the customer services of the public sector and in these, a quite clear segmentation and skill
polarisation can be observed. With respect to the impact of technology, the WORKS report
on Employers’ use of technology and the impact on organisational structure (Greenan et
al., 2009), concludes on the basis of additional analyses on the EWCS data on the overall
upskilling effects of the introduction of ICT, while deskilling seems mostly linked to the
exclusion from the use of ICT. Both the WORKS case study reports and the quantitative
analyses of the report of Greenan et al., stress the emergence of new skills and competences. These too can result from the different concurring developments: the organisational changes related to restructuring and more specifically related to the growing
importance of inter-organisational relationships and distance work, the introduction of
ICT as organisational technologies and the specific market and product developments
(new materials, quality requirements and so on). Such new skills, however, are not necessarily strictly related to the core of the profession, but seem to concern all skill types with
apparently a specific growing importance of social skills, problem solving skills and
resource management skills.
Another key finding to put into perspective the upskilling conclusions is the observation of the fact that ‘upskilling’ is often referring to a considerable intensification of the
work and an enlargement of the skills that the employees need to bring in place when carrying out their work: the difficulty to understand and combine very different types of
knowledge (such as commercial data, new fabrics, working with CAD, knowledge on
filling forms and complying to procedures), to perform at the required speed and to process and apply a lot of information in a short delay or under time pressure. This means that
neither the upskilling nor the importance of new skills necessarily result in a strengthening of the professional competences in a strict sense. These new skill requirements may on
the contrary, in some cases jeopardise the development and use of the core professional
skills, such as was observed specifically in the occupations in R&D and design where they
encroach the required time for creativity, reflection and for ‘thinking’. Furthermore, increased performance monitoring and control systems (such as scripts and procedures)
accompanying new value chain structures, supported by ICT, may limit the opportunities
employees get to use and develop their professional skills.
We may conclude that, due to this processes of ‘skill intensification’, ‘more difficult’
seems not necessarily to be more interesting or more ‘fun’, but often is reported as ‘more
speedy’ and ‘more stressed’.
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5
The development of internal labour markets and
the role of vocational and educational training
5.1
Assumptions and research questions
A final issue of this report relates to the effects of organisational change in general and of
changes in the required skills and competences specifically on internal labour markets. In
line with the previous sections, we can assume that value chain restructuring and intensified collaboration beyond the organisational boundaries will influence the company’s
strategies with regards to recruitment and selection, training and competence development practices and internal mobility of employees. In addition, as organisations are in
close interaction with their environment, it is important to investigate what is the role of
national and regional structures of VET systems in this reshaping of the personnel policies.
With respect to the management responses to the organisational changes observed, the
concept of the internal labour market may be useful. Traditionally the ‘internal labour
market’ has been defined quite strictly as a form of structured labour market within
organisations, characterised by providing internal career possibilities and discouraging
exit to other companies. Internal labour markets typically have the following features:
access from outside (the external labour market) is restricted to specific entry points, often
at lower levels; more senior jobs are filled by internal promotion or transfer, often accompanied by in-house job-specific and firm-specific training (Huws, 2008). Such internal
structures are seen as characteristic of typically large organisations, especially those that
expect benefits from encouraging long tenure.4 The ‘traditional’ internal labour market
typically aims at combining the different HRM policies in a coherent way in order to
stabilise the work force: stable and secure employment contracts, transparent wage
structures, clear internal promotion opportunities, adequate competence development
policies and stabilised relationships between capital and labour.
Today, it is observed that such ‘sheltered’ employment situations may be hollowed out
as a consequence of the increasing instability of the external environment of organisations.
The question in the context of this report is to what extent that, what once was a coherent
set of HR policies is now overturned as a result of the spatial and contractual restructur-
4
However, the way organisations structure the entry and exit of the workforce, the skills development and
promotion of employees, time and contractual issues, can also be regarded as an ‘internal’ labour market
defined in a more general sense. It is therefore interesting to use the concept of internal labour market to
describe changes in the employment relationship and in personal policies related to the changes in
corporate structures.
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ing of business functions along value chains. The flexibilisation of tasks, contracts, and
working time and wage systems may be indications of this tendency of hollowing out of
internal labour market structures. These flexibility dimensions, and how they change in
relation to value chain restructuring, are dealt with in more depth in the WORKS report
‘Value chain restructuring in company strategies to reach flexibility’ (Flecker et al., 2008).
In the report at hand the focus is specifically on the impact of value chain restructuring on
dimensions related to entry and exit, skills and qualification policies and the internal
career trajectories of the employees involved in the restructuring.
The key question is to what extent do restructuring organisations preserve, adapt or
establish internal labour market structures or to what extent do they develop strategies
seeking a new balance between internal and external labour markets, and between their
own organisation and other firms with whom they collaborate? One can assume different
possible changes in the internal labour market structures and company policies in response to value chain restructuring. A first assumption is that the effects on the internal
labour market structures and skills policies will depend on the strategic importance of the
activities concerned. In line with the first and second section of this report, this implies
that firms that seek the secure (and relatively long-term) availability of scarce skills necessary for the use and creation of knowledge and for innovation, will aim at stable relations
with these employees and will invest in the further development of their competences.
This is the case because organisations need to be able ‘to control vital pieces of knowledge
on which their own long-term competitiveness depends’ (Rubery & Grimshaw, 2001: 169).
Therefore, the growing knowledge-intensity of organisations resulting from the externalisation of more codified parts of the production process may imply that companies concentrate on a stable relationship with these core employees.
A second assumption is that, with the lengthening of value chains, the ‘internal labour
market’ as regards to skill provision tend to be stretched beyond the company boundaries.
This can be the case in different respects. When value chains get longer and business
functions and the related jobs are fully or partially spread beyond the company boundaries, this may imply that firms no longer solely rely on the internal competence development of the available work force but in addition collaborate with other firms to secure the
availability of required knowledge and expertise. Equally, shortages on local labour markets which might endanger the availability of required skills for the organisation may
urge them to return to a broader labour market to attract the required qualified workforce. Such a broadening of the skills recruitment base and a possible related erosion of
the in-house competence development policies might be to the detriment of long-term
internal skill development. This might erode internal career trajectories which are typically crucial for the lower-skilled workers or for workers with a low-initial qualification
that build up company-specific competences during their career in the firm.
Another aspect of such ‘stretched’ internal labour markets concern the growing
importance of collaboration with employees from other companies in the chain or with
customers which may offer new learning and career opportunities beyond the initial
company. Based on several case studies of organisations with ‘blurred boundaries’,
Grugulis and Vincent (2005) show that several tendencies may be observed with respect
to skills policies in new organisational models such as the networked company. On the
one hand, the so-called high-level networks can be characterised as ‘learning networks’,
providing employees’ access to networks of experts, new information and knowledge.
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THE DEVELOPMENT OF INTERNAL LABOUR MARKETS
New organisational forms can also support skill development in the jobs by providing
levels of discretion not found in traditional organisations. They may also support individual skills development by an increased offer of formal training opportunities, related to
the formalisation of the relationships within the network (Grugulis & Vincent, 2005: 200).
Such a positive outcome of lengthening value chains does not occur automatically: ‘although relational partnerships and high-trust knowledge were often desired, the risks
inherent in networks often resulted in a significant increase in performance monitoring.
This implied that skills employees could exercise were limited and devalued. Such a context was rarely conducive to an exchange of expertise and completing the task took precedence over skill development’ (Grugulis & Vincent, 2005: 202). In addition, as was concluded in the previous sections, such specialisation and scaling-up may also imply standardisation and more division of labour, leading to a deterioration of learning opportunities in comparison with the situation in the outsourcing company.
A third assumption on changes in internal labour market structures is to what extent
value chain restructuring may lead to the generation of new internal labour markets
within other organisations belonging to the value chain. A career path within - for instance - large service suppliers may then offer more opportunities for skills development
than would be the case in relatively small internal departments within outsourcing
organisations. With available empirical data, these last questions cannot be addressed
extensively in this report because the cases investigated in the frame of the WORKS project did not systematically investigate the destination companies of the value chain restructuring, but concentrated on the drivers and impact of restructuring in the source
companies. Some specific restructuring, case such as in customer services and IT, might
however shed some lights on such new internal labour markets.
There is also a relationship between the establishment of internal labour markets and
the wider institutional context of VET systems. Most of the continental European companies were strongly embedded in what has been labelled ‘co-ordinated markets’, based on
long-term collective organised commitments between employers and trade unions. Such
long-term commitments obviously contribute to the establishment and development of
strong internal labour markets because they imply firm- and/or sector-specific vocational
training programs, acknowledged qualifications, wage profiles, and life-long permanent
work contracts. The development of long value chains crossing the boarders of the existing co-ordinated markets may partly destroy the old institutional frames and evolve in
the direction of what has been labelled as ‘liberal markets’. In liberal markets the coordination between production, the organisation and mobilisation of skills, the wage profiles, and the binding of employees is substantially different (Thelen, 2001). The development of distinct VET systems is also taken up in the scientific debate on Varieties of
Capitalism (VoC), where it has been focussed on the relation between particular economies and production types and strategies on the one hand and varieties of VET systems
on the other hand (Hall & Soskice, 2001). The empirical studies that have been undertaken
within this VoC framework indicate a strong relation between on the one hand ‘coordinated market economies’ (such as the continental European ones), incremental innovation strategies and the development of VET systems that produce strong high-level
firm-specific and industry-specific skills through apprenticeships, on-the-job-training and
vocational schools. The same empirical studies indicate, on the other hand, a strong relationship between liberal market economies (such as the US one), radical innovation
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strategies and weak VET systems but strong general skill development (Estevez-Abe et al.,
2001; Culpepper, 2001). These studies illustrate as well how these different skill-outcomes
can be related to the strategic choices of both employers and workers in what type of skills
(specific skills or transferable, general skills) they invest. As these studies argue, the
investment of both employers and workers in either specific skills or general skills correlate with existing social policies or social protection systems.
The analysis and empirical case studies in the VoC framework are certainly stimulating
and open up interesting relations between structure and strategy. However, these analyses are based on a number of (implicit) assumptions that need reconsideration if we move
to the analysis to value chain restructuring. The VoC framework is (implicitly) based on
the assumption of a national policy setting (social policy structure), national economy and
one specific sectoral (industrial) context. The restructuring processes studied in the
WORKS project cut through different national policy settings, national economies, and
distinct sectors. It is therefore not obvious to apply the arguments and typologies of the
VoC theorists to the empiric at hand. The perspective of the role of (VET) systems will
therefore be focused to the question if and how value chain restructuring interacts with
the existing VET institutions relevant for the companies under investigation. In the
WORKS organisational case studies, the research has an explicit company-oriented perspective and the key issue is not to investigate in-depth the changes in the wider institutional context. Nevertheless, it might be possible to get some indications on how VET
systems play a role in the conditions and effects of value chain restructuring.
5.2
The case study results
5.2.1
The clothing industry: the key role of regional VET systems
It is perhaps because of the fact that the clothing companies in Western European countries have already experienced drastic restructurings for a long time, with massive relocation of production, that this sector provides good examples of how internal labour market
structures may change as the result of shifts in business functions. As elaborated in the
previous sections, the outsourcing and offshoring of the mass production activities in
most companies has led to a strengthening of the more knowledge-intensive business
functions, notably design, logistics and sales. One could have assumed that the disappearance of mass production implies an erosion of the internal labour market structures
for the respective production employees and yet it is the opposite that is observed: companies such as the Italian Green Spa and the Belgian Wonderwear that reinforce their design
and development activities are well aware of the importance of experienced stitchers for
the success of their innovation strategies. In both companies, stitchers are not dismissed
when the (last) mass production disappears from the site but on the contrary, become
actively involved in the design process and in the practical preparations of the mass production of the remote sites. Thus it appears that at least experienced production workers
may take advantage of a new internal trajectory from production to design that goes
along with the decrease of jobs in production, at which they entered the firm. In addition,
the redesign of the jobs of these stitchers, from highly-Taylorised mass production to
broad integrated tasks in prototype production, provide as such new learning opportunities that did not exist before for this occupational group. Of course, initially the stitchers
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THE DEVELOPMENT OF INTERNAL LABOUR MARKETS
with the longest company experience will be the first candidates of such an upward internal mobility. The companies also report that, in order to find enough good stitchers, they
need to almost permanently monitor the local labour market. In these cases the growing
knowledge-intensity of firms resulting from the externalisation of more codified parts of
the production process implied that they concentrate on the strengthening of internal
labour market structures for what have become their core employees and business functions.
In this situation of a real or imminent labour market shortage, the regional educational
system of the industry plays a decisive role. In several countries, such as France, Germany, Italy, Hungary and Belgium, the sectoral VET system has always been essential for
the supply of a qualified work force, but these systems have gradually eroded with the
regional shrinking of the clothing production activities. And the local labour market supply has shrinked accordingly with the disappearance of the educational system. As a
response, companies need to develop active strategies themselves to secure a continued
availability of stitchers, experienced or not, such as can be illustrated with the establishment of new career opportunities for stitchers in the restructured work organisation of
some companies. Other companies react with setting up internal training systems, such as
the Hungarian Copy Fashion. In the German Menswearco, the solution is sought in the
establishment of an own network of skill enhancement and knowledge exchange in a
craft-based way for pattern-makers. Hence, in the clothing sector, different strategies can
be discerned as a response to the erosion of local industry-specific VET systems, ranging
from new industry-level bodies to clearly firm-specific strategies for securing the required
skills to fundamental redesign of the work organisation resulting in broad jobs with intrinsic learning opportunities.
Further, it seems that this erosion of the local labour supply related to the disappearance of production work in these regions and the gradually erosion of VET systems also
further triggers, or at least speeds up, further relocation of remaining production work.
Hence, it may appear that where value chain restructuring results in a fragmentation of
the knowledge and eventually in a complete loss of professional ‘tailor’ knowledge on the
core production function, this may be detrimental in the longer run if such knowledge
still remains important for the bottom-up innovation strategies of companies. The erosion
of adequately trained labour supply may then imply that ‘the prerequisites for a highroad, high-quality strategy, a skilled labour base and a ‘critical mass’ of training and
development opportunities, disappear in the regions’ (Flecker et al., 2008: 20).
As for the other occupational group investigated in the clothing sector, the designers,
here too there are some changes. The situation of the fashion designers is however quite
different than that of the stitchers. Although most of them are highly-skilled, their qualifications are typically not based on specific or highly-institutionalised VET systems. It is a
rather ‘artistic’ and professional occupational group, which implies that self-training is
important and considered as a personal investment - also by the companies who hire
them. It also implies a more developed external, typical professional labour market, with
a specific mobility pattern of designers. This mobility concerns on the one hand regular
moves to other, preferably more exclusive, fashion companies during the career, on the
other hand, there is a regular switch between different employment statutes because
situations of self-employment and of contractual employment are often alternated. The
use of self-employed and free-lance designers by the fashion companies is also increased
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in response to the speeding up of the collection renewal since the companies now tend to
prefer working with freelancer or they combine internal designers with the contracting
out of part of the collection design to external designers (Valenduc et al., 2008: 35). Earlier,
we described how the French Adele partially outsourced the design process to foreign
fashion agencies in order to be able to meet the shortened collection renewal requirements
imposed by the market. Hence, it seems that in this case the increased pressure for
speeded-up and intensified product innovation cycles does not result in a more
elaborated or strengthened internal labour market structure for those employees that have
to answer for this (the in-house designers), but - rather on the contrary - urges firms to
rely on additional design capabilities which they seek to attract externally. This turn to the
external labour market may, however, affect the job security of the designers because of a
more flexible assignment of the work overall.
Nevertheless, another trend may potentially strengthen the labour market position of
designers: the technological innovations in the sector may provide new career opportunities and make the designers more attractive for fashion companies, under the condition
that the designers get the opportunity to acquire the appropriate skills. These skills concern knowledge on new materials and fabrics and the mastering of new sewing techniques. In Germany, it is observed that the technological innovations lead to the attraction
and retainment of employees with a relevant profound educational background (Valenduc et al., 2008: 35). Unfortunately, since vocational training is generally considered as a
personal responsibility for this occupational group, in most cases companies themselves
do not take a lot of initiatives to train their designers in these new skills. This is felt as a
problematic shortfall by the employed designers. If countries or regions would have a
pro-active and institutionalised VET system for designers, this could support the
development of such new technical skills. However, based on the WORKS study this
seems only to be the case in Portugal where there is considerable institutional (European
and national) support for the establishment of textile technology centres to foster careers
for technical designers.
We may conclude that the organisational changes related to value chain restructuring
indeed urge the companies to develop new strategies to meet changed skills and competence requirements. On the one hand, for the remaining production workers, who remain
important for the company’s (innovation) strategies, different responses may be discerned
as a reaction to the disappearance of industry-specific VET systems, both internally and at
the level of the industry, both in terms of formal training as in terms of changes in the
work organisation. As for the designers, there are some indications for company strategies
aimed at the establishment of new channels for competence development, again both at
the level of individual companies and at the level of the industry and the region. Finally,
the growing use of a self-employed work force in the design also suggests a weakening of
internal labour markets, in so far these exist in what should basically be described as a
professional labour market.
5.2.2
Software development: the limits of self-employability
The work force of IT companies can generally be described as high-skilled, with university or high school degrees in relevant scientific domains. Mostly, there is a quite direct
entry from education to IT companies or IT units, sometimes even to the extent that
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THE DEVELOPMENT OF INTERNAL LABOUR MARKETS
employees enter as students. With the exception for Germany and Sweden that have an
institutionalised traineeship for IT students, there are typically no strongly developed
institutionalised sectoral VET systems to provide more focused/company-oriented training complementary to the basic qualifications. The continued development of professional
skills and competences seems to be strongly individualised and the employees are mainly
responsible themselves for the development of their employability.
This does not mean that there are no opportunities for learning in the organisational
environment, on the contrary. First, most IT workers personally invest in self-learning to
keep their knowledge update. Second, the characteristics of the work organisations in
principle provide ample opportunities for on-the-job learning. Especially the quite generally applied systems of project teams can account for this, although in practice such
opportunities depend on the design and characteristics of these teams. Other organisational features may also explicitly provide opportunities for skill development, like tools
for knowledge-sharing that are set up as communities of practice are developed. Further,
the typical career opportunities in IT companies mostly imply a development of different
kinds of skills and competences. Based on the WORKS occupational case studies, Valenduc, Vendramin, Krings and Nierling (2008: 80) distinguish different careers in software
development: organisational hierarchical careers with an upward mobility in terms of
(team and area) responsibilities, organisational technical careers with gradually more
technical challenging and complex tasks; more nomadic, boundary-less careers and careers that are strongly influenced by specific events such as restructuring or privatisation
in case of IT in public services. The career trajectories will be quite decisive for the types of
skills that employees gradually develop: more technical versus more managementoriented.
Finally, formalised training opportunities are - as a rule - available too. These are not
organised at a collective sectoral or regional level but offered by the companies. Formal
skill acquisition programs of IT companies may include project management methods,
technical knowledge, such as programming competences or company-specific software
languages etc. The large German company Business Software offers full educational programs at two levels of expertise, although the management stresses that most of the
training should be on the job. The Swedish INIT implemented an in house training centre,
not only for employees but also for customers. Even the relatively standardised, private
certification training in specific program languages (e.g. Cisco, Java) are typically organised at company level. This mostly means in practice that companies pay for these but the
employees have to follow the training during their private time.
Somewhat simplifying, one might say that such formalised training opportunities are
more developed in large companies and in large projects for ‘big customers’, while the
employees in the smaller firms seem to benefit more from learning opportunities related
to the characteristics of the work organisation (with flat hierarchies, informal and changing work roles, semi-autonomous teams, etc.). With respect to formalised training, most
employees interviewed complain about the discrepancy of the company’s discourses on
the need for permanent updates of skills and continuous learning on the one hand and the
real investments and opportunities they offer to their employees on the other.
How does value chain restructuring, which is in this sector mostly characterised as
mergers/take-overs and internationalisation, impact on these training policies and practices? The general picture that emerges seems to be one of a growing formalisation and
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standardisation of training programs and practices. To a certain extent this can be related
to the fact that mergers and acquisitions, such as by large TNCs, in general lead to more
formalised HRM policies. This was for instance reported in the Hungarian Domainsoft
where the development and implementation of job classification systems led to a more
elaborated and transparent classification of skills and career paths, with evaluations after
each project. In the Swedish company INIT, taken over by a large US-based TNC, employees also experienced this formalisation of HR practices: performance monitoring system and talent review talks were introduced as well as a new structured skills system
with more formalised work roles, skills and personal competence monitoring and evaluations (Tengblad & Sternälv, 2007a: 18). Hence, given the fact that restructuring in this
sector often implies a scaling up of organisations and a related growing formalisation, in
principle this should imply the availability of more developed internal labour markets
and HRM systems, including access to internally better organised training infrastructures
of the company and the insertion in better delineated and more diversified career paths
typical for larger organisations. Another trend of formalisation is related to the system of
internal tendering applied by the software companies where conditions for bidding on
outsourcing contracts often include a detailed specification of required certifications of
high-level knowledge of particular software packages, such as should be acquired by private certification in specific programming languages. Finally, we earlier concluded on the
growing importance on non-professional skills for software developers related to the
pressure for more customer-orientation. This requirement is also reflected in the growing
pressure to acquire such skills in formal training. All this should in principle lead to more
opportunities for formal training and career development and, hence, supports the
assumption that the scaling-up of organisations in this sector contributes to the establishment of more developed internal labour market structures. In turn, this might also
strengthen the employability of the employees concerned, both on the internal and external labour market.
However, the assessments from the employees interviewed in the case studies are
mixed and - again - some counterbalancing tendencies can be identified. First, as was
described earlier, such formalisation, standardisation and proceduralisation may be at the
detriment of more informal ways of skill development often found in smaller companies
in the sector or in the companies before the restructuring. Second, the mutual dependency
of different software development sites sharing similar competences and competing
internally in tendering procedures, may also imply that firms outsourcing software
development no longer rely on their own skills base alone but in addition turn to different
(global) ‘sources’ for the required knowledge. Hence, the lengthening of value chains in
this sector implies a lengthening of the ‘internal’ labour markets. Further, access to a new
or enlarged skilled work force may be the main reason for outsourcing and offshoring in
the first place.
However, this might have additional effects on the training policies of the outsourcing
companies. The possibilities for externalising training costs by using the skills of workers
in other locations and parts of the world might make firms less willing to cover the costs
of continuous education. As these costs are significant, the question of who pays for
training may become pertinent. As the labour market for the companies stretch beyond
their boundaries, this might also lead to an actual erosion of internal labour market
structures or affect existing training and career policies inside the company. As developed
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THE DEVELOPMENT OF INTERNAL LABOUR MARKETS
in previous sections, there are indications that sites participating in global sourcing tenders (have to) invest themselves in the strengthening of internal competence development
and knowledge-sharing mechanisms. Although it can be assumed that this also implies an
increased responsibility for formal training (for instance in private certifications of specific
software languages), this was not clearly observed as such in the cases.
Finally, there is another important observation which counterbalances the assumed
better access to training in restructured organisations: the generally experienced and
reported increase of job insecurity that accompanies the restructurings in all cases. In
flexibility debates the trade-off between more flexibility (versus rigidity) and a stable intrafirm skills development policy (versus externalised skills provision) has been acknowledged for a long time. It is recognised that market-based relations may not be the best
basis for long-term skill development. Hence, even if this is not observed explicitly in the
investigated cases, such effects might be formulated as potential risks in this sector.
It is not fully clear from the case studies to what extent the shift to more formal training
on the one hand and to more training in soft skills and management skills on the other,
actually enhances the employability of the employees. As for their internal position within
the companies, it is likely that the benefits of more formal training will highly depend on
the different career trajectories and the promotion possibilities that are actually available.
From the WORKS occupational case studies, it was concluded that the individual career
choices and career progression are to an important extent dependent on the skill development opportunities and on the actual job content (Valenduc, Vendramin, Pedaci &
Piersanti, 2009: 82). As for the employability of software developers on the external labour
market, some cases mention that non IT skills have become more important in the
selection and recruitment, as well as for the further career development. The shift to more
general skills that can be observed in relation to the application of IT systems and templates, accompanied by the standardisation of activities, has the tendency to undermine
the importance of firm-specific skills. Employees who are not up to date with respect to
the newest software (from Microsoft, Cisco and other market leaders) may be weakening
their position on the labour market both in the firm and outside. To the extent that the
acquisition of these general skills is left to the policies of private companies, the opportunities for employees to enhance their employability will be highly dependent of the company’s policies in this respect.
In conclusion we might say that the impact of value chain restructuring on the internal
labour market, skill and qualification policies and training structures and practices in the
software development industry are mixed and to a certain extent contradictory: the scaling up and internationalisation of organisations might imply access to more elaborated
internal labour markets, but on the other hand these are being eroded by the externalisation of formal training efforts to the wider network and by a growing job insecurity. The
impact on skills and qualification structures from other important trends, such as an
increased standardisation of the technologies and a general trend of formalisation of
organisational practices could not be isolated in the empirical observations. Finally, the
quasi-absence of regional sectoral institutionalised VET systems, such as they can be
found in manufacturing industries, implies that a lot seems to depend on the situation at
the company level. Not only the available and evolving career trajectories and promotion
opportunities, but also the formal training infrastructure and policies and, above all, how
these are eventually implemented and used - or not - by the management.
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5.2.3
Research and development in IT: the learning organisation under pressure?
Similar to the software sector, the employees in Research and Development in IT all have
high to very high initial qualifications, often holding academic PhD or engineering
degrees. Levels of specialisation within one IT area of expertise are also very high. What
seems to play a particular role for the entry in such innovative environments as the labs
and research centres investigated, is their close connection to universities, often through
student’s placements and thesis opportunities. These often provide quite fluid transitions
from education to work. In the Austrian Labs, for instance, entry positions that are filled
by students often are both freelance and part-time. As projects develop and students gain
their degrees, they increase their hours and move on to full-time and, possibly through a
period of fixed-term contracts, to permanent employment (Flecker et al., 2008: 33). The
very high entry qualification levels, the proximity to and interaction with universities and
the intrinsic learning nature of the profession and the working environment, including
opportunities to attend external learning events such as conferences and seminars, imply
that few or no institutionalised additional formal qualification systems exist. Some
- larger - companies do offer additional training opportunities, such as on project management or languages. Employees working in these firms as a rule also invest a lot themselves to keep the knowledge of their research domain up to date and this fact is not per
se problematic for the respondents.
As for the careers in the research labs, these typically only evolve from junior researcher to senior researcher to project leader. The latter have more responsibilities in
terms of project management and administrative follow-ups, but sometimes this role is
even in rotation for different projects. While, in general, the R&D centres are characterised
by (very) flat hierarchies and hence limited promotion possibilities, most employees nevertheless adhere a long-term perspective to stay in the same job and company, which is
usually explained by the informal working atmosphere and the ample learning and
development opportunities that are intrinsic to the interesting and challenging jobs.
Employees also generally consider their possible alternatives on the external labour market as quite high. The other side of the coin of this highly-specialised and specific internal
labour market is the limited overall career progression for those employees who do not
move to other companies.
Generally, the case studies do not show that restructurings deeply impact on these
particular entry, skill development and mobility patterns. However, some cases learn that
the restructurings offered additional mobility opportunities and new career paths, related
to the establishment of more managerial oriented careers, which are implicitly or explicitly distinguished from the more technical careers. This development can mostly be related to the growing orientation to market-driven and -funded projects and the shift to
more applied research, as was described in the previous sections.
On the other hand, this same evolution towards more market orientation may have
negative consequences on the actual learning opportunities. The different time horizons,
funding structures and reporting requirements of ‘market- and target’-driven projects, in
contrast to more fundamental research, may put under pressure the time and the resources that are (made) available to the researchers and hence - in the longer term - might
erode their skill development that is deemed fundamental to secure their external labour
market position. Unless they take the full individual responsibility themselves to invest
time and money to secure their competence development.
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5.2.4
The food sector: erosion of internal labour markets
The previous sections have already indicated a number of management strategies with
respect to skills and qualifications in the food sector. On the one hand, a strategy of codification, standardisation and automatisation of blue-collar and low-skilled clerical tasks (in
production and logistics) can be observed, resulting in formal deskilling and reduction of
training programs. At the same time strategies of task-enlargement, team work, work
flexibility, and work intensification are deployed. On the other hand, a strategy of upskilling and new skills combined with new training programs can be observed, mainly for
management levels. The reorganisation of the skill and qualification profiles in this sector
seems indicative for a fundamental change in the internal labour market policy and hence
we might say that this sector may be illustrative for the mechanism of how a strategy of
continuous restructurings may contribute to the undermining of the existing co-ordination forms at the sectoral and company level.
The case of the Benelux food company Maltco (logistics) provides a clear illustration for
this evolution. Historically this company was considered to be a firm with strong job tenure often implying life long contracts. The initial qualifications at the entry of the company were rather general and not technically specific and a lot of employees moved
between several departments during their career. The skills to carry out new tasks related
to this mobility were acquired on-the-job. The last decade, when the company strongly
internationalised, the policy of internal recruitment changed dramatically and was shifted
to external mobility and to exit strategies. All employees experienced a speeding up of
subsequent restructuring projects and a growing pressure for more job flexibility. The
restructuring investigated as a case study, the relocation of a logistics department to
another company site abroad, was difficult for the older employees. Both their age and
their initial (rather general and moderate level) qualifications resulted in a cul-de-sac with
no internal job alternatives left and early retirement as the only option. Next (and related)
to this, middle management positions are now more often occupied by newly arrived,
young professionals, while in the past these positions provided opportunities for lower
qualified employees with some seniority. These young entrants are very mobile within the
wider global company, with less stability in middle management positions as a result.
This double shift of the company policy is also a double-edged sword, as one of the managers asserted: ‘on the one hand it creates dynamism within the company, but on the
other hand it also brings insecurity’ (De Bruyn & Ramioul, 2007b).
This case provides a good example of the erosion of internal labour market structures,
particularly affecting the more vulnerable (older and lower qualified) work force in the
context of a company-wide restructuring.
5.2.5
IT in public administration: the technological-oriented or context-oriented
pathway
Quite a different situation is found in the outsourcing of the IT function in public administrations. The ‘outsourcing’ of public administration tasks coincides with a choice between two different management strategies related to skills and qualifications. Several
case studies (explicitly) point to the dilemma of following either a ‘technological’ or a
‘context’ pathway. The first pathway is mainly driven by the possibilities of new informa-
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tion and communication technologies, and coincides with a standardisation of products/
services and processes. The second pathway is driven by sector and/or context-specific
characteristics of the different services and the specific demands of the ‘clients’ (citizens,
business). The technology pathway opens up the possibility of outsourcing and concentration of services at long distance of the local service centres. The context pathway leads
to a much more differentiated organisation of services at shorter distance of local communities and clients. Both pathways result in different required skills and recruitment strategies.
The cases illustrate the (implicit) struggle by public administration organisations with
the choice between both pathways, or to quote one of the reports, the choice between a
‘cost-driven’ or a ‘service-driven’ strategy. The UK City Council case gives a good example of this struggle between technology and context. The City Council decided to transfer
the IT department to a private international consulting services provider (PROF) that did
not have a long-standing relationship with the public sector. The qualification requirements and recruitment strategies of the new organisation (PROF) were totally different
than the City Council policy. The City Council used to recruit new staff locally. Knowledge and commitment to the local context were important aspects of the required skills.
The recruitment strategy of the PROF organisation, on the contrary, was not related to a
specific location: staff is recruited for a specific ‘service line’ or ‘assignment’; relevant
skills are flexibility and the ability to develop inter-personal contacts. Staff has to be able
to work on very different locations. This strategy coincides directly with standardisation
of work processes. The result of the transfer of tasks of the city council to the PROF
organisation was the start of standardisation and the introduction of templates and systems. However, the whole process did not end up in a complete outsourcing of the City
Council tasks to PROF locations. To the contrary the ‘IT department of the City Council
kept by and large the same structure (…) IT staff still works in the same offices, have
stayed on the same terms and conditions and are still working in similar team structures’
(Dahlman, 2007a: 10 & 12). This outcome could be explained by the need to keep a certain
structural link with the local situation. The UK case report gives an additional explanation: strong workers (union) resistance against the shift from public to private.
The UK and Dutch public administration cases illustrate another trend: to the extent
that the chains still need considerable firm- or sector-specific knowledge and skills, the
employers have to develop new forms of co-ordination between different (public and/or
private) organisations in the chain and between different national settings to develop
adequate VET systems. In the public administration cases it was clear that sector-specific
knowledge is still important and as a result we still can observe policies to stimulate
workers to invest in these skills. The traditional IT skills were very firm specific and were
partly trained on the job. The transfer of IT activities to external providers has resulted in
more general IT skills (as the UK case illustrates), as well as a migration of IT workers
within public administration to the ICT sector as illustrated in the Dutch public administration sector. This strategic choice of these workers can be interpreted as a shift from
firm-specific to industry-specific skills. At the same time the growing importance of firmspecific skills of these workers has weakened their position on both the internal and
external ICT labour market where a broader knowledge of the newest software is needed
and where employees have to apply their knowledge in different sectors (UK PROF case).
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THE DEVELOPMENT OF INTERNAL LABOUR MARKETS
We may conclude that these cases are good illustrations of how deep the impact of
restructuring may be, not only on the skills requirement as such but on the more comprehensive strategies that the companies have to follow including a revision of the polices to
attract and develop these skills and competences. Obviously such strategy shifts have
important consequences on the skill development and on the labour market position of
the employees involved.
5.2.6
Customer services in the public sector: divergence of internal labour market
structures
The often far-reaching restructurings of the customer service in the public sector also
obviously impact on the internal labour markets, entry, and mobility and training policies
of the companies involved. The considerable diversity of these restructurings however,
makes it not easy to identify general patterns of changing personnel policies: outsourcing
and centralisation, geographical decentralisation, fragmentation into independent companies, trends of rationalisation, etc. Those cases where the telephone-based customer services were centralised and standardised, and mostly outsourced to call centres, a clear
fragmentation of the work force can be observed. This was the case in the Italian DVLA
and the Austrian City Life where the restructuring resulted in two separate labour markets, one internal, one external and no mobility between the two. In the two companies,
totally different HRM practices are observed: one offering long careers, the other offering
no internal promotion opportunities and jobs which are generally perceived as transitional.
The German Railways provides another interesting example: this huge company was
reorganised into several different subsidiaries but nevertheless this did not fundamentally
eroded the existing internal labour market, at least not at the short term. The reasons for
this were the prevailing collective agreement including measures for job security, the setting up of an internal employment agency and the company policy oriented to secure a
considerable flexibility. However, in practice it could not be prevented that, particularly
horizontal, mobility was more limited after the restructuring.
It emerges from the cases that the extent to which transfer of personnel is involved with
the restructuring of the customer services has a considerable impact, not only on the
employment conditions in general (which is dealt with in other reports of this series), but
also in particular on the future career opportunities. This impact can be diverse, as is
illustrated with the case of the Dutch company Telecom. The transfer of personnel to the
call centre CSN ‘has enlarged opportunities for careering as a contact agent, as the range
of jobs at different skill levels has become much wider’ (Trommel et al., 2007: 13). Hence,
in the cases where the more complex part of the customer service is outsourced or in
cases, such as CSN, where the tasks are gradually extended and enlarged, the restructuring may open up new possibilities for learning, skill enhancement and eventually upward
mobility. Obviously, such new opportunities for transferred personnel highly depend on
the structure of the internal labour market in the destination company. The case of the
Greek Post showed quite the opposite: transferred personnel arrived in a company where
promotion was highly dependent of the supervisors’ discretionary competence and top
functions are recruited externally. This highly-contrasted with where they came from: a
company with clearly delineated career paths based on transparent criteria (Gavroglou,
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2007c: 5). As is explained in other reports, the transferred personnel may in some cases be
protected against the immediate worsening of their working conditions (for a relative
period) by prevailing national, sectoral or company-level regulations, such as collective
agreements or secondment models.
5.3
Conclusions
The last section of this report focuses on the company’s responses to the changing work
organisation and the related changes in internal labour market policies. The cases show,
again, divergent outcomes. First, it was observed that some occupational groups may
benefit from value chain restructuring to the extent that the core business of the restructured company becomes more knowledge-intensive and hence requires more investment
in the skills and qualification policies and the internal career opportunities. This was for
instance observed in some cases of the clothing sector, the IT and the customer services of
the public sector. Obviously, the improved qualification and career opportunities highly
depend on the existing internal labour market structures and skills policies in the destination company or the restructured work organisation in the source company. To the extent
that these have elaborated HRM practices and career trajectories, restructuring might
open up opportunities for the work force involved.
However, several cases showed how value chain restructuring may also lead to an
extension of the ‘internal’ labour market structures to other companies of the chain, as
was put forward in the assumptions, with a mixed outcome for the employees involved as
a result. A fragmentation of the employment conditions, including the training and career
opportunities, and the erosion of often long-standing, internal labour market structures
was found in some public sector services (railway, post) and in the food sector, and in
both this seemed in particular to affect employees with lower initial qualifications. The
cases in the software sector interestingly showed how strategies of internal tendering and
global sourcing might imply a broadening of skill development policies beyond the company, as was indicated with a possible shift of formal training efforts and skill development policies along the chain, and a growing pressure on the different companies in the
chain to take care of the required policies. As regards the outsourcing of IT to the public
sector, the restructuring implied a quite fundamental shift of the path followed with
respect to skills and competence recruitment and development.
The cases also show quite contradictory developments with respect to internal labour
market structures: in the clothing sector (the designers) and the software industry it
seemed that a broadening of the skill development strategies induced by market pressures
or by restructuring events can be combined with more job insecurity and contractual
flexibility. Hence, different dimensions of the traditional internal labour market structures
seem to move simultaneously in opposite directions. In the clothing sector the emergence
of new strategies developed as a response to the erosion of local industry-specific VET
systems at the industry or company level, occur alongside a growing use of flexible contracts such as self-employed designers. In the software development sector a growing
formalisation of HRM policies, including more opportunities for training, obviously did
not prevent feelings of job insecurity and an externalisation of formal training efforts to
the wider network. All this indications may indeed suggest that the traditional internal
labour markets are eroding in the wake of global value chain restructuring.
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Next to internal labour market structures, the existing VET systems too seem to be
under pressure and in transformation in an economic context of intensified restructuring.
In the clothing sector the erosion of industry-specific VET systems may lead to an accelerating relocation of production activities. In this sector, different responses to the need of
more institutionalised qualification systems were observed, both at the industry- and the
company level, both in terms of formal training initiatives and in terms of learning
organisations. The cases of the outsourcing of IT in the public administration illustrated
how companies have to develop new forms of co-ordination between different (public
and/or private) organisations in the chain and between different national settings in order
to develop effective VET structures. In other sectors, such as software development, the
combination of decentralisation and centralisation of formal training structures is observed, but the qualification mechanisms are basically company-oriented.
One may conclude from these highly diverse outcomes that in the sectors investigated,
where the value chains are under restructuring, the different institutions that have to provide a skilled work force are in deep transition in the sense that both the individual company and the individual employee are becoming the prime actors in the competence
development along the career. Indications of new industry-based or regional structures
indeed remained scarce. The institutional effects of both the behaviour of workers and the
strategies of firms to externalise vocational training from firm- and/or industry level to
other places are likely to undermine the traditional VET systems. To the extent that such
institutions are eroding or non-existent, it seems in turn that the outcome for the employee depends much more on the company strategy. Further, it seems that the individual
employee is becoming more and more responsible for his or her employability and competence development. In a situation of growing job insecurity and flexibility, which was
reported frequently as another outcome of the restructuring, such a personal responsibility may put considerable pressure on the employees implicated in restructuring.
However, one could as well argue that, if the chains still need very firm- or sectorspecific knowledge and skills, employers have to develop new forms of co-ordination
between different (public and/or private) organisations in the chain. This can be observed
in the case studies at hand. The examples of the food sector and the public administration
sector illustrate that sector-specific knowledge is still important and there are policies to
stimulate workers to invest in these skills. In the clothing sector, some new initiatives at
the industry level, for instance in Portugal, are observed.
The prevalence of different types of value chain restructuring and related changes in
company policies with respect to skill and qualification development cannot easily be
linked with types of national, regional or industry-specific co-ordination mechanisms on
the basis of the case studies at hand. The restructuring processes studied in the WORKS
project cut through different national policy settings, national economies, and sectors. It is
precisely the focus on value chains and how they restructure and develop, that makes it
difficult to formulate conclusions based on the analysis of national settings. The cases
illustrate the substantial different recruitment traditions between sectors and countries, as
well as the substantial different social policy conditions between sectors and countries.
These differences raise the question as to whether the strategic choices of both employers
and workers to invest in either specific or general skills will be influenced by the development of these chains. Following the logic of the arguments put forward by authors as
Estevez-Abe, Iversen, Soskice and Culpepper, one could argue that all these changes
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might push the strategic choices in the direction of less firm- or sector-specific and more
‘chain-specific’ or general skills. The empirical study indicates different trends in the
development of VET systems within the context of value chain restructuring. It is difficult
to qualify these directions very precisely, because the case studies reveal a huge variety of
different effects both on the level of workers and employers, which cannot be related to
one specific explanation. Regional, national, technological, institutional and cultural
aspects play a role. Eventually, one thing becomes clear. The ‘ideal-typical’ causality
between types of economy, type of production strategy and VET system, as indicated in
the VoC literature cannot easily be applied in situations of value chain restructuring.
82
6
General conclusions
This report is on the role of knowledge in the restructuring of value chains, the implications for the work organisation and for the use of knowledge and skills, the impact on
required skills and the responses of human resources management to these changes.
These themes were investigated in four sections. First, the question was to what extent
knowledge plays a crucial role in the explanation as to how business functions are reorganised along the global value chain. The assumption was that the extent to which
knowledge is codified or codifiable is a key determinant in the restructuring of production processes and the related changes in the division of labour at the level of the value
chain. The second research question dealt with how organisations manage possible
changes in their knowledge-intensity related to such a value chain restructuring. Here, it
was assumed that changes in the composition of the organisational task pool and business
functions at the level of the firm, and hence in the required knowledge, imply that the
strategies with respect to the management and the use of this knowledge have to be revised accordingly. Such company strategies may imply further steps in knowledge codification or in the shaping of conditions for knowledge innovation but, typically, both
strategies are combined. Since the shaping of the work organisation determines to an
important extent the use of knowledge and skills in the labour process, the question to
what extent restructurings imply changes in work organisations is included in this section. The third research question focussed on changes in skill and competence requirements of the work force involved in these organisational changes. Such changes may
imply upskilling or deskilling tendencies as well as the need for new qualifications and
competences. In the last section, finally, attention was turned to policies and practices
concerning the acquisition and development of skills and the focus is on the question to
what extent existing structures and strategies with respect to skill development are overturned and/or in transformation. Here, the attention was not only on the company level
but included, where possible, the role of VET systems.
For each of these research questions, the huge amount of empirical data collected in
case study research and available from a selection of European surveys was systematically
screened. This was done for each of the industries selected for the case study research: the
clothing industry (including R&D, production and logistics) the sector of software development (including R&D and production), the food industry (including production and
logistics), public administrations (including IT and customer services) and services of
general interest (customer services). One remarkable conclusion that can be drawn from
this thematic analysis of the empirical data is that it seemed possible to discern several
common trends and patterns, despite the fact that these sectors and business functions, as
well as the forms of restructuring that they are undergoing and the national contexts in
which they have to operate, are extremely diversified and fundamentally different in sev-
83
CHAPTER 6
eral respects. The aim of this final section is to describe these common patterns and trends
and to synthesise the main findings.
As regards the first research question, the role of knowledge in global value chain restructuring, the analysis of restructuring events studied in the different sectors and business functions suggests indeed that it is the most codified or codifiable parts of the production process that are most likely to be externalised, whether outsourced or relocated,
while the organisations attempt to keep the more knowledge-intensive activities in house.
As a result, global value chain restructuring, as it is investigated in WORKS, typically
results in a redistribution of knowledge along the chain. The paths that the sectors and
value chains follow, with this redistribution as a result, are however extremely diversified
and may take different forms, ranging from the full or partial externalisation of business
functions, the opposite move of integration of business functions, concentration or - on the
contrary - decentralisation of business functions, shifts in core business functions, a scaling-up of organisations related to mergers, offshoring implying a growing internationalised character of the chain, restructuring related to privatisation, and so on. This means
that, from the perspective of the role of knowledge in the production process, global value
chain restructuring can be regarded as another step in the progressing division of labour
at the level of the overall production processes of goods and services but that these new
divisions of labour may take highly different routes and shapes. It became also clear that
the redistribution of knowledge along the chain is subject to struggles between different
economic actors involved in the chain, and hence can - and should - be characterised as a
highly dynamic and contingent phenomenon.
A key finding was that the codifiability of knowledge is intrinsically limited and, as a
result, so is the restructuring of value chains. In several sectors and business functions it
was confirmed how tacit knowledge is important for a smooth production process and
that codified and tacit knowledge are closely interrelated. The restructuring of labour
processes in the frame of organisational changes typically brings these limits of knowledge codification to the surface. The problem of fragmentation of the system knowledge
and loss of craftsmanship along the - lengthened - value chain, the knowledge-dependency between activities organised at different nodes in the chain, the role of experiencebased knowledge for the product quality, the role of shop floor knowledge for speededup product innovation cycles, the importance of ‘context’ knowledge in highly-informatised and digitised corporate environments, ... These are all different indications and
expressions pointing at this same conclusion of limits to knowledge codifiability. As we
have observed, organisations may or may not acknowledge the importance of this uncodifiable knowledge for their labour processes and for their innovation capacities, and they
may or may not take adequate measures to maximise the use of it. Such measures imply
the installation of new (co-ordination) roles, the use of ICT in view of closing the information loop along the value chain or the establishment of organisational practices that facilitate the circulation and combination of different types of knowledge available in the
labour process, for instance by securing the proximity and collaboration between employees involved.
The extent to which organisations in restructuring deploy such measures or revise their
strategies to manage knowledge was investigated in the second section. Here, we found
that the reorientation or stronger focus on activities that require the combination of different types of knowledge and on knowledge creation may imply that firms adapt their
84
GENERAL CONCLUSIONS
work organisation to better take account of this requirement. These organisational practices may be diverse in the sense that they may lead to more formalisation and bureaucratisation or to more decentralisation and the acknowledgement of informal learning
mechanisms. We observed organisational changes such as the setting up of collaborations
with different experts both within the companies and beyond, both with colleagues and
customers, the formalisation of competence structures and training practices, the institutionalisation of internal career paths, the redesign of tasks in view of more learning
opportunities, the setting up of ‘communities of practice’, the implementation of digitised
knowledge-sharing tools, etc. The findings also support the conclusion of skill-biased
organisational changes in the companies at the higher ends of the value chain, resulting
from two mechanisms: the externalisation of lower-added-value activities implying the
redundancy of the lower-skilled segments of the labour force and a reorientation on innovation as a prominent competitive strategy, rather than one based on pure cost-reduction.
However, the search for new ways to manage the use of knowledge and skills in a
restructured corporate environment did not automatically result in what can be called ‘the
learning organisation’. The most important counteracting mechanism here is with no
doubt the trend of more standardisation and formalisation that can be observed in different industries and that may take different forms. Indeed, despite the observed introduction or confirmation of organisational practices that stimulate knowledge exchange and
innovation, there is a simultaneous trend towards further rationalisation, standardisation
and knowledge codification through the introduction of bureaucratic processes or knowledge codifying technologies. The question in which direction the changing work organisations will eventually evolve, to a more learning oriented organisation or to a more Tayloristic and controlling organisation, based on codified knowledge, is the result of a combination of a wide range of intervening and contextual factors. In the WORKS case studies, examples of both outcomes have been found. But when looking at the most prominent
findings from both employee and establishment surveys on this matter, as studied in the
frame of the quantitative work of the project, the trend seems rather to point at a growing
dominance of the lean production model, implying some organisational changes indeed
but tightened within the ‘straightjacket’ of more control and less autonomy. Similarly, the
overall decrease of job complexity that was found in most of the EU countries and sectors
in the longitudinal analysis of the EWCS data is not an encouraging sign in this respect.
Also these observations support the conclusion that, overall, organisations in the EU are
rather evolving towards less than towards more learning job structures and working environments. This conclusion is important in that it can raise concerns about the longer-term
evolution of the innovation capacities of firms, which can be regarded as crucial in the
intensified globalised economic environment. After all, our investigations lead also to the
conclusion that the balance between organisational models is likely to be decisive for the
future position in the value chain of both the companies and their employees.
When turning the focus to changes in required skills and competences (third section),
again it is striking to see that some common trends may be discerned despite the huge
variety of sectors, business functions, occupational groups, restructuring forms and
organisational responses to these. The intrinsic complexity of studying changes in skill
requirements obviously hampers clear-cut statements on the impact of value chain restructuring as such, because such an impact can not be isolated from skill effects from
other, mostly concurring, developments such as product innovations, changes in the tech-
85
CHAPTER 6
nological infrastructure or in the economic environment and labour market developments. Given the specific selection of the case studies, with a majority of cases situated at
the higher ends of the value chain, the results seem nevertheless to point at upskilling
trends overall, related to the growing knowledge-intensity of the activities performed, to
the growing importance of product innovation and to the introduction of (organisational)
technologies to co-ordinate work and production flows. Obviously the cases investigated
at the other end of the value chain, such as in some customer services, more clearly illuminated that at other points in the chain, the result of restructuring can be quite different.
Further, the analyses confirm the emergence of new skills and competence requirements,
again not only resulting from value chain restructuring alone but also related to other
trends such as the introduction of ICT, the increased market pressures and shortened
innovation cycles and an overall standardisation and formalisation of products and processes.
Most striking with respect to both the observed upskilling effects and the emergence of
new skill needs were two clear observations that can be made quite generally in several of
the sectors and occupations investigated. First, the new competences required from occupational groups involved in restructuring are not necessarily related to the core of their
profession, but rather seem to concern ‘side’-skills such as social skills, problem solving
skills and resource management skills. Hence, these new competences come on top of the
existing professional requirements and may even push aside the further development of
the core professional skills. Second, ‘upskilling’ is often related to a considerable work
intensification and an enlargement of the skills that the employees need to bring in place
when carrying out their work: the need to understand and combine very different types of
knowledge and the required speed to process and apply a lot of information in a short
delay. This means that neither the upskilling nor the importance of new skills necessarily
result in a strengthening of the professional competences in a strict sense. Here it should
again be acknowledged that these developments cannot be linked solely to value chain
restructuring. Speeded-up business processes, growing market pressures, shortened
innovation cycles, more competition, … all contribute to this effect. Furthermore, increased performance monitoring and control systems accompanying new value chain
structures, supported by ICT, may additionally limit the opportunities employees have to
exercise and develop their professional skills. This section therefore concluded on processes of ‘skill intensification’ instead of a clear-cut upskilling, even in those organisations
that can benefit from a growing knowledge-intensity. In future research, it might be
important to more clearly differentiate between ‘more difficult’, ‘more interesting’ and
- why not - more ‘fun’, and it might be important to acknowledge that the observation of
an increase of skill requirements may in practice mean the requirement to work harder.
The last research question investigated to what extent restructuring organisations preserve, adapt or establish internal labour market structures or to what extent they develop
strategies seeking a new balance between internal and external labour markets. Further,
the role of and interaction with the organisational environment, more precisely the VET
institutions and structures that contribute to the local availability of an adequate trained
work force, was investigated. As with the other research questions, the outcome is not
clear-cut and a diversity of organisational responses and strategies was discerned. A first
observation was in line with the conclusions of the growing knowledge-intensity of the
investigated firms under restructuring: it was observed that some occupational groups
86
GENERAL CONCLUSIONS
may benefit from value chain restructuring to the extent that the core business of the
restructured company becomes more knowledge-intensive and requires more investment
in the skills and qualification policies and the internal career opportunities. Such a positive outcome seems however preconditioned by the existence of established HRM practices, qualification policies and career trajectories in the (destination or mother) company.
A second observation was that value chain restructuring may imply the extension of the
‘internal’ labour market structures to the wider chain. This may take different forms: a
fragmentation of the employment conditions, including the training and career opportunities along the chain; the erosion of, often long-standing, internal labour market structures implying mobility from outside; a broadening of skill ‘sourcing’ and training policies beyond the company, a shift of formal training efforts and skill development policies
to other companies of the chain, and a growing pressure on the different companies in the
chain to take care themselves of the availability of the required competences.
The cases also show quite contradictory developments with respect to internal labour
market structures: in some sectors it seemed that a broadening of the skill development
strategies induced by market pressures or by restructuring events is combined with more
job insecurity and contractual flexibility. Here, different dimensions of the traditional socalled internal labour market structures move simultaneously in opposite directions.
Hence, it seems possible to conclude that there are different indications that the traditional internal labour markets become overturned.
Next to the internal labour market structures, also the existing VET systems seem to be
under pressure and in transformation in an economic context of intensified restructuring,
which is cross-cutting nations and sectors. Here, clearly, the historical and national existence or absence of industry-based VET systems is an important element in the changes
observed. Most obvious in this respect is the difference between manufacturing industries
on the one hand (such as clothing and food) where industry-based VET systems are more
institutionalised, and the other, mostly younger, sectors. In the first a gradual erosion of
existing VET institutions could be observed as well as different new responses to meet the
need of more institutionalised qualification systems, which can be situated both at the
industry- and the company level and may relate to both formal training initiatives and
more learning oriented workplaces. Indications of new industry-based or regional structures remained scarce in the studies at hand. To the extent that VET institutions are eroding or non-existent, it seems that both the individual company and the individual employee are becoming the prime actors in securing competence development along the
career. This implies that the outcome for the employee depends much more on the company strategy or on his or her own responsibility. In a situation of growing job insecurity
and flexibility, which was reported frequently as another outcome of the restructuring,
such a requirement may put considerable pressure on the employees affected by restructuring.
To conclude, the analyses indicate different trends in the development of VET systems
within the context of value chain restructuring. It is difficult to qualify precisely what will
be the outcome in the end, because the case studies reveal a huge variety of different
effects both on the level of workers and employers, which cannot be related to one specific
explanation. Regional, national, technological, institutional and cultural aspects all play a
role.
87
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