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Knowledge and Innovation in Administrative Areas – Part II

By Dr. Carlos Bezos Daleske, responsible for Corporate Development at DaimlerChrysler España Holding – September 14, 2004

The following article describes a PAR (participatory action research) experience in a business environment (DaimlerChrysler, Spain), where the research method has been strongly ethnographic. It was divided in two parts for easier reading. Part II of the article presents the action plan derived from the case study reported in Part I, reports the results and derives some lessons for practitioners and researchers from the experience.

Part I of the article provides an introduction to the field, presents the methodology used, and reports a case study.

 

Action Design: Putting Together Know Why and Know How

With the evidence collected from research and everyday practice, the action plan had to focus on the following key factors: increase knowledge of employees, optimization via participation, reskilling and emerging of knowledge, and the value of accounting, including awareness at management and employee level and displacement of processes control from operational units towards accounting.

A new, consulting-like, human resources (HR) process based on variable payments by target fulfillment and performance was set up. Also training as a goal of the annual planning process was a novelty for the former administration area. Capacity planning, job valuations and other classical HR tools never used before for accountants aimed at professionalizing tabor relations. This new instrumentarium produced fears and resistance among workers and middle management: many had the intuition that the old industrial system would disappear and with it, status quo, privileges and even jobs. The first fear proved right, but the second was false. Nevertheless, the various forms of resistance, passivity and other forms of blocking were the primary research material that allowed us to find out how the actual system worked.

The balanced scorecard, a tool to measure process performance, organizational development and to link both parameters to financial performance was a first attempt to involve workers in projects. As a participation project, it clearly failed, but it revealed the patterns to be used later in PAR-projects, especially concerning the use of a worker-close language and a worker close-activity. The issue of process efficiency was a key observing point for analyzing the contribution of accounting processes to the overall performance of the car-selling business.

Observations and data gathered in both projects nourished the ethnographic research and produced experience for the action process. Both instruments acted also as an organizational frame for linking the research and action plan.

The process of research, action and participation at DaimlerChrysler in Spain

Figure 2: The process of research, action and participation at DaimlerChrysler in Spain (click image for larger version)

Employee Knowledge

The new HR process established that training was a strategic matter and therefore also to be planned bottom-up and this work was fully participative because it not only involved managers but also employees. They could themselves plan their skilling via an annual interview with their superior which was to be introduced in the training plans. In this conversation, they could speak openly about their weaknesses, needs, and professional development, as well as the skills they thought would be useful in the future.

The action factor consisted in the implementation of these plans. Their evaluation became a new reference point for research: Were they useful? Were they profitable? Did they meet goals? The collected data allowed the initiation of a process of reflection and correction. One of the results was to find out that there was a serious lack of knowledge of SAP. The consequence was a large collective plan that allowed every employee to reach the same SAP level so that the knowledge gap between individuals almost disappeared (some would always retain an advantage, as in any diverse group).

This SAP training was immediately applied, so that the employees and the company enjoyed an early payoff. The training achieved something more important than providing a knowledge base to employees; it put the staff on a knowledge level that allowed employees to move from mere bookkeeping to information analysis and research, as well as to propose process optimization and automation opportunities. Many of those proposals were turned into actions.

As another positive effect, people started to be able to manage more abstract accounting and IT concepts, so that they could have a deeper understanding of the processes they were working on. Thanks to this, they could be involved in process analysis and optimization. Yet, if the company had not bet on transformation rather than outsourcing and redundancy, fear of losing their jobs would have prevented anybody from helping in process optimization and would have increased resistance.

Optimization via Participation

This involvement was not easy; at the beginning, many employees did not understand what they were being asked to do. They were used to being passive subjects and they did not know how to operate outside the logic of production. They lacked a process view. As soon as they were getting used to this reframing – which took some months – lots of hidden knowledge about their day-to-day realities in processes emerged. This was a knowledge that no external consultant could have found, nor would most human resources specialists have thought to look for among people that "have been doing the same job for the past 20 years".

It is true that many employees lacked any theoretical concept that allowed them to express this knowledge. But they were working in teams with people that handled those meanings more comfortably and so a process of action learning took place that helped to generate a common language and common concepts.

Soon it was discovered that the most positive role for employees in projects was not necessarily asking them how they work; making them objects of research. Instead, it was a better to give them an "expert role" in consultation sessions. When the "process experts" performed the workers' actual job, while the real job owners acted as supervisors, positive effects were achieved. First, they appreciated that the "experts" and the people close to management "got their hands dirty". That way, the "process experts" could really appreciate the everyday difficulties employees had to struggle with and all the invisible problems they solved without being asked and paid for it. Second, as supervisors, they corrected and directed other project members in an iterative way about the best way of working. By doing so, they had to describe actual work in everyday language, causing many hidden tasks to be named and procedures to be coded.

Self-Managed Training and Reskilling

Of course, real knowledge gaps still existed: working this way, employees on projects could identify what knowledge they lacked and suggest training measures that needed to be taken. This meant that they could organize their own training using the knowledge resources that other employees – closer to more qualified functions like balance or process analysis – already had. They knew this knowledge existed and demanded it, because they worked together with them on the optimization projects.

This experience led the shared services center to reflect on the gaps in theoretical accounting and financial knowledge, but also on the amount of hidden knowledge that employees – apparently deskilled – possessed. For this reason, in the third year, when the Group used the PAR approach to build its qualification policy, a double strategy was adopted. On one hand, self-managed internal trainings were used to fill the qualification gap. On the other, these trainings were put together by the employees themselves on the basis of their daily work. In that way, they were forced to investigate themselves the necessary theoretical frame they needed and to codify what they knew in a way comprehensible to their colleagues.

Value of Accounting

At this point there should be no need to say that one of the general internal trainings for all the employees and management was on the "value of accounting". This was almost the only "ideological" approach made to employees. After some negative experiences during the research phase and while introducing the HR system, workers were never told what to be or to think. In other words, there was little of the typical discursive work on what consultants tend to call "business culture". Instead, little by little, employees were permitted to perceive for themselves that things were changing for the better. The needed training on the "value of accounting" was done when results were already visible and a sense of pride and value for the work done could be transmitted. This also extended to an overall picture of why each one was doing her or his actual tasks, giving them an organizational meaning.

On the level of middle management, strategy for changing social perceptions on the value of accounting was developed through coaching and workshops. In the final stage of the project, managers were made to participate in a strategy workshop, where through a systemic approach, they became aware of the dangers of the de-location of so called administrative functions. They were urged to discover the real value of their activities or become prepared to outsource them to Poland, India, or any other low-cost country. They were asked to show what their contribution to car sales was. This caused them to make up in their minds about what the study of the car sales operation described above already proved: that they were an inextricable part of the business and had to focus primarily on providing it with information and process knowledge. As a result, the managers developed a strategy based on constant improvement of processes.

Management also changed the system of pricing for the accounting services. Instead of billing by the number of people dedicated to accounting (normal practice when a service is considered a "cost factor"), they classified the services as "transactional, management information and process consulting". This was very important, because it resulted in the visibility of accounting and of the contribution to business by the users of accounting services. It also separated the cost of service from the cost of personnel.

Regarding power, the old administrative area found itself being responsible for the accounting of nine of the companies the automotive Group had in Spain. It had become a major control unit. Besides that, it managed the financial transactions of those companies. Financial transaction processes reflect selling processes like a mirror; accounting gets all the data produced by operational work. Therefore accounting is an excellent position from which to observe the potential for improvements all over the company (nine companies in this case), because every practice that is not standard will show up in the accounting processes. From this point of view, the shared services center started to impose its conditions on the operative processes of its customer units. After some initial conflicts, process control shifted to accounting. Process control means a very close interaction with the main business decision makers. Greater awareness on value led to empowerment and to power shifts. It must be added, that the power shift was eased by the passing of the Sarbanes Oxley Act by the U.S. Congress in late 2002. According to this law, a reaction to the Enron scandal, financial directors and chief executive officers bear criminal liability for irregularities in the books.

 

Tangible Results

This policy generated tangible results on both the organizational and economic levels. For example, the internal trainings in accounting saved over 100.000 €, which equaled the cost of external trainings. Besides that, they were far more effective than external trainings, since they were directly related to issues and problems of day-to-day work. The savings in SAP skilling were even higher, since they were provided cost free by a consulting firm of the Group in exchange of financial training: their consultants needed skills in the financial processes of the SAP program.

The increase of the staff's qualification levels allowed 40% of the employees to do analytical tasks instead of rough bookkeeping (though still keeping their transactional work). Before, only 10% of staff, all of them in the balance sheet department, were able to do these more skilled jobs. Also, 28% of staff now participates in process improvement tasks on a routine basis.

This way, the savings of the shared service center (a significant part of administrative costs (1)) not only came from process automation and from providing service to more companies with the same resources. They came also from the migration of workers from transactional to analytical and consulting tasks for which customers were ready to pay more. The constant process optimization driven also by the employees also produced more savings of costs in a sort of "virtuous circle".

According to measures done for the balanced scorecard, within three years the general qualification level of the center rose by 54%, the accounting skill level by 39%, while the SAP qualification level grew by 60% (results measured by the number of employees that attended to trainings in that skills (2) and use actually the learned knowledge in their daily work).

Not all the results were positive. Still 50% of employees are working only on transactional tasks when a task mix would be more desirable. The project failed too in creating real awareness of these issues at middle management levels and these middle managers easily fall back into a production-oriented mind when the workshops and coaching stop.

 

Conclusions

The aim of this paper was to describe a PAR experience in a business environment, where the research method has been strongly ethnographic. This is something unusual, at least in Spain. Some lessons for practitioners and researchers can be derived from the experience.

The case confirms the thesis of Dulmanis, McKenzie, Krooglik and Pejnovic (2004), that using PAR in business enables an interesting amount of tacit knowledge to emerge, empowerment to be produced, and for awareness to rise while political action is tied to research. The present shared services organization has coded most of the invisible and unnamed everyday knowledge of workers. That way, the general skill level has risen, especially since this knowledge has been disseminated via internal trainings.

Empowerment is a clear result of the process. The former administrative staff are now skilled accountants with significantly higher employability than three years ago. Many of them work in analytical and some of them in consulting tasks. It is true that between 40% and 50% are still employed in transactional work; but even these have a higher knowledge level.

Awareness on the value of accounting has been a key change driver for management and employees. Here, PAR strategies have been successful in raising consciousness. This, however, is not so when it has come to establishing a more general sense of the importance on employee participation in projects and self-managed training. The idea that workers bear knowledge has not penetrated middle management, probably because many of the middle managers were not directly involved in optimization projects (in order to allow a space free of hierarchical power for employees and let everybody have equal roles – something that seems impossible when middle managers are present).

The action taken was a result of awareness in higher levels of the company of the value of accounting: it is due to this awareness that the shared service center has been able to produce a displacement of power towards accounting. Process control and involvement with core business processes are the result.

Ethnography proved to be a useful tool for organizational analysis in a case where complexity made it necessary to understand the social dynamics of the case. It provided a welcome balance to the deployment of the usual business tools. The time invested in deep research was repaid by quick implementation of the action plan. More importantly, no second plan was needed, nor further time and morale consuming restructuring.

Participant observation helped to unveil the industrial-like labor relations behind the surface of "modern" human resources practices. Without participant observation it would have been difficult to see the forms deskilling adopted in this particular company and link them to labor relations, age, class and gender and to the quest for efficiency: probably the most shocking result for the company.

The social sciences approach also helped to make visible the economic value of accounting as a core business process. The relationship between the symptoms observed by management at the beginning of the project (deskilling, demotivation, low performance) and undervaluation of accounting was key in creating the change strategy. It seems clear that age and original skill levels (upon entering the company) are not necessarily related to performance, ability to adopt new technologies or openness to organizational change. Rather job standardization without task development and fear for future are responsible for underperformance (3).

In-depth research on organizations and the participation of employees in projects and their own trainings has tangible results in form of revenue (savings in this case), performance, efficiency and productivity as well as in form of a general improvement of skills, awareness and morale. And just as important, the company now counts on a staff that they see as ready for functional flexibility as processes and technologies develop further.

Innovation is more profitable than the ordinary cost cutting approach. A shared services center, a typical outsourcing strategy, would have saved a significant part of administrative costs but only until decreasing performance would have forced the company to relocate the supplier or to start a new restructuring process. But due to constant improvement, every year new ways of saving money are found, thanks also to employee participation in internal process consulting.

 

References

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Footnotes

  1. The actual figure has to be kept secret due to company information policies.
  2. The measurement is actually more complex than described. It uses a skill catalogue that is divided in several sub-skills according to work processes needed by each job. There are over 60 sub-skills and five learning levels for each one.
  3. Of course some individuals do not always reskill themselves and exceptions will always be found.

 

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