The Transformation of World Economy Due to Technology Essay Example

efficacy of functional structures also increased compared to process-oriented structures, which increased the payoff to scope.

The efficacy of hierarchically coordinated systems increased compared to self-organizing systems, leading to an increase in the payoff for vertically integrated systems of command and control. As a result, the relative efficacy of government provision and control also increased, resulting in a decrease in the payoffs for free markets, secure property rights, and minimal government intervention. It is worth considering whether recent innovations in organizational design, operational engineering, accounting systems, and control technologies could reverse these shifts and potentially explain the decline of bureaucracy. The Prussians played a key role in perfecting the bureaucratic model during the 19th century, with notable contributors such as Heinrich von Stein, Gerhard von Scharnhorst, August von Gneisenau, and Helmuth von Moltke. Their administrative innovations included centralized materials requirements and logistical planning, rule-based control, standard operating procedures, merit-based principles, functional administrative design, task decomposition with narrow job descriptions, and sequential processing. The American contribution to this system focused on activity and cost measurement, process engineering through standardization, and the use of electric motors to optimize workflow by enabling the implementation of moving or continuous assembly lines where each assembler performed a single repetitive task.

The introduction of the moving assembly line revolutionized the manufacturing process at Henry Ford's Model-T Plant in Highland Park, Michigan, in 1914. This advancement significantly boosted labor productivity, resulting in dramatic price reductions from $780 in 1910 to $360 in 1914. Ford achieved this by handling every aspect of car production, starting from raw materials. However, achieving complete vertical integration meant organizing and managing numerous activities along with a large workforce. This

necessitated the recruitment and organization of workers, staff specialists, and middle managers within a hierarchical structure based on merit - commonly known as bureaucracy. Bureaucracy not only enhanced efficiency in large and complex organizations but also became an inevitable aspect of their operations.

Only very large organizations were able to fully benefit from bureaucracy as only they had the means to allocate significant resources for data gathering and processing, which was essential for coordinating activities and resource allocation by top management. Thus, it appeared that larger organizations were inherently superior. This conclusion had no natural limitations. In the United States, the progressive movement played a key role in establishing modern public administration. The progressive reforms, including an executive system, input-focused budgeting, a professional civil service with merit-based personnel administration, rule-based control, procedural standardization, specialized tasks, and a strict administrative hierarchy with clear staff and line functions, were largely influenced by the Prussian model. A few examples of this influence can be seen in the War Department under Elihu Root and the USDA Forest Service under Gifford Pinchot, as well as the NYC Department of...

Progressives recognized the influence of Col. George E. Waring, who led sanitation reforms, as a source of inspiration for their administrative changes. However, they also expressed unease about adopting the governing structures of an authoritarian and militaristic regime.

Woodrow Wilson famously defended the practice of borrowing administrative practices from authoritarian states without jeopardizing democratic politics by arguing that politics and administration are separate functions. He used the analogy of observing a murderer cleverly sharpening his knife to illustrate his point. Regardless of their origin, progressive reforms greatly improved government services and the productivity of

public employees. Numerous anecdotes support this claim, including the significant decrease in disease following Col. Waring’s reforms, the reputation of forest rangers for efficiency, the shift from government contracting out to in-house production, and the widespread enthusiasm for postalization in the early 20th century.

, running businesses like the US Post Office). Not all of the evidence is anecdotal, however. Cross national comparisons show, for example, that total factor productivity growth in surface transport once tended to be higher in nationalized systems than where government regulated price and entry and higher in regulated systems than in competitive ones. Similar evidence exists with respect to most so-called public utilities. Empirical evidence also exists as to the consequences of the wave of reform that transformed the governments of many U. S.

During the last century, cities experienced significant changes in their bureaucratic arrangements. These changes resulted in increased infrastructure investment and economic development. Even after taking into account factors such as city and time effects, these reforms had a positive impact on cities (Rauch, 1995). By the middle of the last century, value added per worker in the public sector remained 40 percent higher than in the private sector, despite higher employment growth. This demonstrates that bureaucratic arrangements previously provided essential elements like security, jobs, economic stability, fairness, equity, and "one size fits all" services that were necessary from the turn of the last century to the mid-1960s. However, over time these organizational structures became outdated due to innovations introduced by General Motors and Alfred P., making centralization, executive control, input-oriented budgets, and standardization obsolete.

Sloan was best known for implementing the multi-product organizational structure, or M-form, in GM. This

structure allowed each major division to serve a specific market segment with autonomy and separate accounting. The performance of each division was assessed using the DuPont system. In the short run, coordination between consumer goods divisions and component divisions was achieved through buyer-seller relationships and transfer pricing arrangements. For longer-term coordination, GM implemented the first modern capital budgeting system in the US. These organizational innovations were widely adopted by American businesses during the 1950s and 1960s. However, improvements in education and automation have reduced the effectiveness of bureaucratic personnel systems, such as control by rules and standard operating procedures, task specialization, and sequential processing.In many industries, traditional methods of human resources management have been replaced by modern practices that focus on people. These practices include self-managed teams, job designs that incorporate control, and the decentralization of decision-making within organizations. Additionally, these practices involve selective hiring, job security, thorough training, and compensation based on organizational performance. As a result of implementing these high-performance HR practices, organizations experience faster learning and innovation, increased flexibility and productivity, and ultimately improved customer service.

In recent years, American businesses have shifted away from functional compartmentalization and vertical integration due to cost reductions in communication, logistics, and information processing. These cost reductions are made possible by computers and our increased ability to utilize them. The dismantling of economies of scale and scope that were built upon functional specialization and vertical integration is resulting in changes within companies. Even large companies are emulating smaller competitors by reducing the size of their head offices, eliminating layers of bureaucracy, and focusing on their core businesses. This has led to the development of flatter and smaller

organizations that revolve around generic value-creating processes and specific competencies. Some organizations now operate as virtual networks with a single mission while others function as alliances of networks with multiple missions. Both types of organizational arrangements are referred to as hyperarchies by Philip Evans and Thomas Wurster (1997), named after the hyperlinks found on the World Wide Web.

According to Evans and Wurster, organizations like the Internet, object-oriented software programming architectures, and packet switching in telecommunications have removed the need for directing information flow. This elimination of information channeling has also eliminated the tradeoff between information richness and reach. The extent to which hyperarchy will continue is uncertain. Evans and Wurster suggest that it will dismantle all hierarchies, whether they are based on logic or power, by providing the potential for random access and information symmetry. These changes have already had varying impacts on businesses.

The productivity growth in the public and private sectors differs significantly, but it has minimal impact on the production and delivery of public services. The government's productivity is notably low, which contributes to a considerable gap between value added in manufacturing and services. Surprisingly, private services only see a 5 percent decrease in value-added per worker compared to manufacturing, while government productivity lags behind manufacturing by one-third. Consequently, even though the government employs 20 percent of the American workforce, its contribution to overall output is less than 15 percent.

The text suggests that if government workers were as productive as nongovernmental workers, a five percent increase in GDP could be achieved. Furthermore, if the value-added per government worker had grown at the same rate as in the goods sector since mid-century, GDP would

have been thirteen percent higher than in 2003, equivalent to $1.4 trillion. It is important to note that this represents approximately three-fourths of total federal, state, and local expenditures. Additionally, our current economy reflects a demand for worker autonomy and superior service with more choices. Traditional business and government bureaucracies are incapable of meeting these demands.

The new public management emphasizes the implementation of organizational designs and practices that are transforming business. These include decentralized, flatter, and possibly smaller organizations that are structured around sets of generic value-creating processes and specific competencies. High-performance HRM practices, modern information technology, balanced responsibility budgeting and control systems, as well as loose alliances of networks are also part of this approach (Jones & Thompson, 1999).

One exemplification of this notion is the New Zealand Post, which, under its CEO Elmar Toime, transitioned from a typical bureaucracy to a profitable state-owned enterprise and the most efficient postal service worldwide. This transformation involved reducing the workforce by 30%, but due to changes in organizational design and HRM practices, the organization did not become weakened by a distrustful and unmotivated workforce (Pfeffer, 1998: 186).

Ultimately, the goal is not only to enhance productivity in the public sector but also to promote democracy. The traditional authoritarian and hierarchical nature of old-style bureaucracy does not align well with democratic values. Additionally, the demands of managing large, vertically integrated, functional organizations have often overwhelmed the ability of the public and its elected representatives to prioritize the general welfare.Restricting the public sector's role to services aligned with the common interest will improve the efficiency of democratic governance mechanisms.