Employees and Entrepreneurship

Employees and Entrepreneurship

Co-ordination and Spontaneity in Non-Hierarchical Business Organizations

New Thinking in Political Economy series

Ivan Pongracic Jr.

Over the last few decades, there has been a great deal of management literature recommending the removal of firms’ hierarchies and the empowerment of employees. Ivan Pongracic, Jr. examines these themes through the lense of the economic theory of the firm. Balancing the tendency for management literature to overlook basic costs and trade-offs of decentralization, and the rigidity of economics that hinders an appreciation for the real world phenomenon of decentralization, this book arrives at a realistic middle ground between the two extremes. The dance between hierarchy and employee empowerment exists in even the most hierarchical firms, and this book explores this often overlooked dynamic.

Chapter 6: Conclusion

Ivan Pongracic Jr.

Subjects: business and management, entrepreneurship, economics and finance, austrian economics


Thus organizational innovations like worker participation, teamwork and just-intime inventory systems can be seen as attempts by firms to expand their capabilities by placing decision-making authority and responsibility in the hands of those most able to meet the firm’s objectives. Combined with guaranteed employment, these innovations foster commitment to the firm and reduce the need for high degrees of hierarchy and monitoring. And the role of managers changes from one of director of production to one of coordinator and facilitator. Managers now incorporate ideas from all quarters, from marketing, engineering and production, into initial planning decisions and then facilitate needed changes once production is underway. The base for ideas is expanded and everyone becomes responsible for more than just narrowly defined tasks. These kind of organizational changes have enabled firms to enhance their product quality and tailor their output according to specific market segments. Simply put, by recognizing that ideas come from places other than R&D departments and that not only top level managers are capable of idea implementation, firms can now do things they could not do before. This lesson has been, and still is, a difficult one for firms to learn because the entire organizational culture has to change. But by focusing on the capabilities of firms, economists may now learn the same lesson. (Minkler 1993b, pp. 584–5) There has been an increasing amount of recognition of the importance of decentralization of decision-making in modern firms over the last decade or two. Though...

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