Management Fads And Organizational Architecture

This article applies and extends the three‐part organizational framework used in the preceding article to a broad range of management innovations. After furnishing some interesting evidence of the rise and fall of management techniques such as TQM, Reengineering, Just‐in‐Time Production, and Activity‐Based Costing, the authors raise and then attempt to answer a number of questions: What explains the popularity of these management innovations? Why do they often fail to produce the expected benefits? How can managers tell if a particular technique is right for them? What can managers do to increase the likelihood that an adopted technique will be successful? The persistent, and at times seemingly insatiable, corporate demand for management innovations is viewed by the authors as a “rational” economic response by senior managers to major changes in the external business environment—changes that in turn dictate changes in business strategy. For example, when confronted with external changes such as deregulation or heightened global competition, companies often find it necessary to refocus their efforts on improving product quality and operating efficiency. And such changes in business strategy tend to require a revamping of the three critical components of organizational architecture: (1) assignment of decision rights, (2) performance evaluation systems, and (3) compensation systems. As the authors argue, innovations such as TQM, outsourcing, Re‐engineering, and JIT typically involve major changes in just one or two of these critical elements of the organization, but not all three. The failure to coordinate organizational changes in such a way that these three elements are mutually consistent and reinforcing is one important reason why management innovations can fail to meet expectations. The framework described in this article is designed to help managers considering one potentially valuable set of organizational changes to identify other facets of the organization that also require attention and perhaps complementary adjustments.