2.Part Two: Specialists, Services and the Accountants

Speaker A Sorry I'm late.

Speaker B Oh, just about to start.

Speaker A I've been with Andrew Black and Richard Green. And meeting went on, rather.

Speaker B I see.

Speaker C I think.

Speaker B Did you finish now?

Speaker A Not really. There was a wee difference of opinion.

Speaker D We are going to examine and I.

Speaker A Think it'd help if they saw this tape.

Speaker B I'm not prepared for other people to see this stuff, Amos, particularly when I haven't seen it myself.

Speaker A I'd be very grateful if you'd let them see it.

Speaker B All right. But if you're rushing your fences I'm not.

Speaker A I promise you.

Speaker B Just a minute. How do you know they'll come? I'm not going to make this an official invitation.

Speaker A Well, come.

Speaker E All right.

Speaker D In this, the second part of this series on organization, we are going to examine the role of specialists, the organization of services and the situation of accountants. But before we can do this, we must understand the nature of operational work. In the first part, we established that not only are over 90% of Britain's working population employees, but that they contract into roles in varied types of that universal form of organization we termed the employment hierarchy. I'll remind you of the definition.

Speaker F An employment hierarchy is that network of roles set up by an association of people to carry out the work required to achieve the objects of that association.

Speaker G Ah, the aims and objectives of the enterprise. Very factionable just now.

Speaker A That's not what he's talking about, Richard.

Speaker G No? No help to boards of directors trying to state the purpose of the company. Nothing to get them off the hook of some nice oversimplification such as to make profits.

Speaker A If you'd only listen. He's talking about the work of an enterprise. It's something you don't have to theorize about because you can observe it and discuss it objectively.

Speaker B The objects of the association are clear enough. They're laid down, surely. We, for instance, exist to manufacture and sell gears and clutches.

Speaker F Work is delegated by the chief executive down through one or more strata of executive roles.

Speaker D From this definition, I will take the phrase the work required to achieve the objects of the association. This work is what I mean by operational work. And we can, I think, generalize about its nature.

Speaker F Operational work is the design and development, the production and the marketing or offering of a defined range of goods or services.

Speaker D Offering. I shall in future use symbols for these functions.

Speaker F D for product or service development. M for manufacture or production. MK for marketing, selling or offering.

Speaker E The term offering is included because although the civil service, local government, social services and so on do not, as a rule, sell or market their services, they do have to make known that such services are on offer.

Speaker F Offering is thus the parallel function in such organizations to the marketing of goods.

Speaker G I see.

Speaker A Offering. Indeed, these ideas aren't restricted to industry.

Speaker D By definition, then, all employees of an employment hierarchy directly engaged in DM and MK functions are doing operational work. Work done by other employees of the hierarchy is either specialist work concerned with operational work, service giving to support operational work, or work in the accounting system. I'm going to suggest that it's useful to think of all operational work as being split into three dimensions. This split helps to build a useful mental model. And as we shall see, it does help to explain why most organizations seem to need specialists in each of these three dimensions. Let's take a simple example to show how an operational role contains all three.

Speaker E This man is working in the M function. We see him first as a person in a role, the P or Personnel dimension. We see that he's using a series of techniques or methods to do his.

Speaker F Job, the T, or technical dimension.

Speaker E And that he is working on a timed and quantified program of work.

Speaker F The PR or programming dimension.

Speaker E All specialist work then falls into one.

Speaker F Of these three dimensions p, personnel and organization dimension. T technical dimension, PR programming dimension.

Speaker D To demonstrate this further, we'll pose our machine operator with a problem.

Speaker H Now then, shall I up and finish this job tonight? Take it easy and finish it in the morning.

Speaker E That's his problem. How's he going to make up his mind?

Speaker H I know my bloody foreman expects it finished quick. What they say if I don't? He's been a bit off end lately.

Speaker E The P or Personnel dimension.

Speaker H If I do try and finish tonight, I'll have to stop the job and regrind a bloody grooving tool. I'll blind, me.

Speaker E The T, or technical dimension.

Speaker H Is it a three star job for urgent delivery or not?

Speaker E The PR or programming dimension.

Speaker C He hasn't yet mentioned specialists. He certainly has, except to show the dimensions they work in. Dimensions for by. I can see well what the man's driving at, but it's our rigid we framework. Can you see me or any other lad stopping to think which dimension of work we're in as we go along?

Speaker G Oh, don't be tired, sir Mandrew Hamish. As I understand it, this man's pinpointing ideas for organisational use ideas concept, so.

Speaker A That we all know what we're talking about. What you said is just daft, Andrew. But if you start thinking of your production engineer mine, if you please. When we get him, your production engineer and his subordinates, as being in the T dimension and all those progress chasers planners, work movement men and storemen and so on, as being in the PR dimension, their jobs are an organizational mess and you know it.

Speaker B Oh, yes, the PR dimension. I was rather wondering about that.

Speaker A It was about to be explained when we stopped.

Speaker B Well, let's get on, shall we?

Speaker D These are just three of the considerations which might arise in the operator's mind. It would be possible to postulate many more, but experience shows that each is clearly assignable to one or other of the three dimensions PT and PR if I had chosen as an example somebody working in product development or marketing, the decisions and considerations arising under those dimensions of operational work would have been different. Specialist personnel and technical work is familiar, so no further description is needed. But what I call programming work is normally concerned with allocating work to departments and machines, timing, the arrival of stores and components, seeing that deliveries are made on time, and so on. The suggestion is that from top to bottom of an employment hierarchy, every operational role has these three same dimensions.

Speaker E But the higher up the hierarchy we go, the wider the knowledge required by people in the roles. Hence the need for specialists in role A. For instance, the manager may need a personnel officer to help him in the P dimension of his work, and B One, a production engineer, to help in his T dimension, and B Two, a programming officer to help in the PR dimension of the role.

Speaker D Specialists employed in organizations are frequently in a position where they are granted no explicit authority as a means of getting others to implement the ideas arising from their own special knowledge. If specialists have no explicit authority, then the tendency is either for much of their value to be lost, or for them to try to assume power or authority over their operational colleagues, which will certainly lead to trouble. Indeed, some of the textbooks lay great stress on the need for specialists to be able to persuade others, and the need, therefore, for them to be very mature and patient people.

Speaker G Dear me, this man must have been in industry. I would add charm and the height of rhinoceros.

Speaker C I'd agree with you there.

Speaker G Thank you, Andrew. But I take his view of him on the suggestion of assuming authority, influence and persuasion. I think he's more correct in these.

Speaker A Terms that's assuming power. Oh, really?

Speaker G Have I power over you, Andrew?

Speaker C Nod may say so, but I'll grant the persuasion. And I'll say this yon film lad is treading on dangerous grounds.

Speaker G I agree. Show this to the rest of the senior staff and landmines will go off all over the place.

Speaker B We might well test that, Richard.

Speaker A Oh, I see.

Speaker G Early on with the show. I assume there's an answer.

Speaker A There is indeed.

Speaker D The problem often starts because specialists are shown in organization charts like this.

Speaker F This shows no difference in the relationship of A to BT than the relationship of A to B One and B Two. But of course, it is different. BT is, in fact, accountable to A for ensuring that the production methods in use in the production shops are up to date. BT cannot fulfill this task if his relationship to B One and B Two is simply to give advice. Alternatively, if BT can insist that B One and B Two use his methods, then A cannot hold B One and B Two fully accountable for output of.

Speaker E Goods, remembering that BT's work is part of A's role. It's not difficult to see where BT's role fits in.

Speaker F BT is responsible for advising A in the P dimension. It is often wise and appropriate for BT to discuss issues with his colleagues at B level before advising A, a will consider his advice and would be well advised to discuss it with B One and B Two. He then decides on his policy.

Speaker D Note.

Speaker E It is a's policy. It is BT's advice.

Speaker F A is now in a position where he can hold BT accountable for seeing that the policy is implemented.

Speaker E He may not always require BT to do so, but this is one of the ways in which overbizy managers can get assistance from their specialists.

Speaker F If A wants BT to carry such accountability, BT is granted authority by A to give instructions to B One and B Two, provided that those instructions are clearly within the policy established by A.

Speaker E BT has now become what I shall term a staff officer, and his authority to instruct B One and B Two is staff authority. It is not managerial authority.

Speaker D It's A, their manager, who allocates the.

Speaker E Work to B One and B Two.

Speaker D And reviews and judges how well it's done. BT has no authority to do this. Now where does a stand? Quite clearly, the idea puts A firmly in the position of carrying the can, which is, after all, the function of his role. Decisions are his, however they may have been arrived at. A can use his staff officers to interpret and clarify those decisions and to see that they are correctly implemented. B One and B Two have an untrammeled right to question BT's staff instructions with their manager, A. If they feel that they are unworkable, the accountability and authority, and therefore the relationships of all four roles have been explicitly defined. Now, I'll develop the.

Speaker C Well, there's an element of sense about it as I see it. The man suggesting that young Roberts here and Richard are your staff officers in what were all these dimensions?

Speaker A P t's personnel and technical.

Speaker C Aye. So if you want certain production or personnel techniques used, and like as often enough happened in the past, I might not agree with you, but I'll do it your way. Then it's up to these two to help me and see that I get on with them. And if I think the peddling damn silly idea, you don't go gunning for.

Speaker A Me, providing we aren't going beyond the managing director's instructions.

Speaker C But I come back to you.

Speaker B I'm not insisting you accept advice from my specialists. I'm telling you to implement my decisions with their help.

Speaker C So if you've made a wee mistake, taken a wrong decision, it's on my.

Speaker B Own head, certainly not on yours. But I'm relying on my specialist to give you detailed help. If the job isn't going according to plan, then you, as production manager will have to get together with my staff officer and one or the other of you will have to keep me posted.

Speaker C There's some logic to that. And I take it that my own staff officers would work for me in the same way they would. So if one of my specialists and one of my managers couldn't sort things out for themselves, they'd have to come back to me.

Speaker B Certainly, if we decided to work on these lines, it would be your decision.

Speaker C Aye. Let's hear a wee bit more of this.

Speaker D Now I'll develop the pattern further.

Speaker F Three ranks of management. Each manager has a staff officer attached. There is a complex of relationships between BS, CS and DS. B is responsible for giving CS task instructions. BS is responsible for the training of CS in their shared discipline and giving him technical education and instruction. B will assess CS by his daily work, by the zeal and effectiveness with which he carries it out. B S will assess him as a specialist on the extent and sophistication of his knowledge.

Speaker E Explicitly, B is CS's operational manager and BS is his specialist manager. B and BS are therefore co managers of CS.

Speaker D This may appear to be an unacceptable situation, but if you examine the real situation in many of our best organized companies, co managership is what emerges. A simple exercise will confirm my statement. Postulate a situation when the role CS is vacant, who would take part in choosing a candidate to fill it? Fill the role? And a year later, at salary review time, who will assess the incumbent? Now let's move on to the situation.

Speaker B What's going on?

Speaker A Before I explain, let me ask one question. Whose decision?

Speaker G I think it comes over to this office. Don't you agree, Andrew?

Speaker C Yeah, you might say so.

Speaker B What is this all about?

Speaker A The meeting we were having was over the shortlist for Andrew's new production engineer.

Speaker G And, as the man says, both Andrew and I were taking part.

Speaker C But there's a wee difference of opinion about the type of lad I want.

Speaker A Before let me explain, Andrew's. After experience. Richard wants a graduate with experience, of course. And I was pointing out that you.

Speaker B Ought to be involved because I want people appointed who have the potential to move up in the company.

Speaker A Precisely.

Speaker B But surely I've laid that down as policy.

Speaker C Yes, to me, I haven't seen it in any positive form.

Speaker G Nor indeed have I. Oh.

Speaker B A situation which will soon be rectified.

Speaker D Now let's move on to the situation as it would be if all operational managers two ranks down from the chief executive required and were provided with one type of staff officer. Let me say that I am not advocating the use of staff officers unless the need exists. Whether or not certain dimensions of a manager's work should be externalized into specialist dimensions must depend on the circumstances. But the relationships must be quite clear.

Speaker F Here we have the organization as it is assumed to be and as it is displayed in effect. BS has a specialist department of his own. It will often be found on examination that Zed spends most of his time working in B's department with B's subordinate managers. Zed, in fact, may be a sort of disguised staff officer attached to B. But the relationship of Zed to B is very hazy. B is not authorized to give task instructions to Z, but probably does so in a covet manner. The relation of Z to C is probably a very difficult one. Z will be regarded by C as someone from another department interfering with his work. If the real situation is formalized, Z becomes CS, a staff officer attached to B. This was in fact the real or extant situation.

Speaker E Zed, who has now become CS, and B and C will all find the situation more satisfactory. The relationships are now quite clear.

Speaker C Stop. If I've understood correctly, the man's made a very sensible point. How did he put it?

Speaker A He's saying that plant managers, instead of having constant visits from specialists from central specialist departments, would do a lot better.

Speaker C If they had these same people attached to them as staff officers. Is that right?

Speaker A It is. Factory managers had find their relationships with such specialists much easier if their real relationships with them as factory staff officers were established.

Speaker C Hey, as it is, am I scrapping with your production engineering staff?

Speaker G But at the moment I've got control of these young men. If they're attached to you, Andrew, I may lose control. And the Lord knows what fancy ideas.

Speaker A They may play about with then Andrew's production engineer.

Speaker C When I get him.

Speaker G When we get him.

Speaker B Yes, of course.

Speaker A When you get him. He'll have to accept technical instructions from Richard. Because remember, Richard will be his co manager. It's the co managership by hire specialists that makes attachment down the line possible without losing technical control.

Speaker G Of course. How silly of me. But then we don't work this way, do we?

Speaker D One last important point before I leave the subject of staff officers. If a manager a real role is set up with, say, six specialists serving him, it would be difficult to give each of them authority over his operational subordinates. This would probably lead to the issue of conflicting staff instructions. Situations like this may occur, but in.

Speaker E Many circumstances interaction between processes and machining will arise and complex interaction between the two staff officers will result. This could be obviated like this. The single T staff officer now has two subordinates separately accountable for process work and machine work, though neither of them are staff officers.

Speaker D If the idea is accepted that operational work has three dimensions and staff officers are appointed in each of them, then, because each staff officer is operating in a distinct dimension of work, a central point.

Speaker B Gentlemen, our specialists are not organized in three categories at present. Now if, and I repeat if we adopt this suggested pattern, it may mean displacing some people who will feel loss of status. Now we could accept the principle and deviate from it a bit so that some of our people are left in an unchanged position and we pull everything into the pattern as future opportunity occurs.

Speaker G If you decided to adopt these ideas.

Speaker D We'Ll see the second type of role to be discussed is that of the service providers. I don't mean those who service the product in the market, I mean maintenance departments, toolrooms, chemical analysis laboratories, canteens works, police transport, packing and so on. These are neither operational nor specialist functions, but service provision departments. In aggregate, these services consume an ever growing proportion of the total revenue of companies, and there is accordingly a tendency to centralize them for reasons of economic efficiency. There is also a tendency, which I think is desirable, to make those in command of services immediately accountable to specialist staff officers, rather than to create situations where one operational manager provides services to his colleagues.

Speaker F SC is in charge of a plant maintenance department. He is accountable to BS, one of the factory manager's staff officers.

Speaker E SC's role needs definition as follows he.

Speaker F Has a budget of resources in terms of the size of his maintenance department. BS B One, B Two and C One and C Two are authorized by A. To use those services, SC must supply the services demanded of him by those authorized up to the limit of his budget.

Speaker E The operational managers cannot be held accountable for output unless they get the services which they specify.

Speaker F That is why SC must not be authorised to decide what level of service to give to the operational managers, as is frequently but erroneously the position.

Speaker E The reason given is so that the service manager can keep the total cost of services under control.

Speaker F But a more realistic way is to insist that SC keeps within his budget. When demand for his services exceeds his budget, he reports to BS.

Speaker E BS being experienced in that area then sorts out the priorities.

Speaker F If B One and B Two do not agree his decisions on priorities, the matter goes to A. In that way A retains control.

Speaker A Comments can I say I like the idea too much? Well, think of it from your point of view, Andrew. In the gear factory, your A, it'd be your staff officer who the plant maintenance manager would be accountable to.

Speaker C Aye, so he would. Aye, we might well save a wee bit of money that way. I wouldn't mind giving it a try.

Speaker D I'll think about it. Now I turn to the last type of role I want to discuss accountants. Accountants employed in industrial and commercial hierarchies are another type of specialist, but their role is different from the staff officers I've been describing. Employment work takes place within an economic setting. The British Companies Act allots a very special place to those accountable for stating the financial results of the company to the board of directors and through them to the stockholders.

Speaker F Section 110 of the first schedule of the 1948 Companies Act states that the Secretary of the company shall be appointed by the board, not by the managing director.

Speaker D The Secretary is personally accountable beyond the board to the law for quite a range of duties. He cannot be held so accountable unless those who prepare the financial accounts of the company are his subordinates. Thus, the company secretary sometimes carries also the title of chief accountant, or in other cases, the chief accountant is subordinate to him. This diagram shows the difference between the assumed and extant situation of accountants.

Speaker G Assumed extant. Hamish, please.

Speaker A Assumed the situation as we think it is extant, as it is requisite as it would have to be to accord with the real properties of the field in which it exists.

Speaker E Thank you.

Speaker F The Secretary responsible to the managing director, the chief accountant of a subsidiary company responsible to the managing director of that subsidiary, and plant accountants responsible to plant managers. That is the assumed position. The external position. All the financial accountants ultimately responsible to the secretary and chief accountant, though they are posted to different geographical positions throughout the company, in order to be in a position to give adequate service to managers.

Speaker E This shows more clearly the situation. In principle, the secretary has a separate financial hierarchy of his own.

Speaker D In industry, accountants tend to attract unjustified unpopularity because their three main functions are not made explicit. Yet they are not difficult to understand.

Speaker F Financial Accounts Responsibility accountants report probably monthly and by statute annually, through the company's secretary to the board on the financial results of the way in which the managing director has discharged his duties. Monitoring Responsibility accountants continuously monitor the manner in which all managers are safeguarding the assets of the company and are responsible to the board for ensuring that integrity of conduct is maintained and company law respected.

Speaker E Service Provision to Managers accountants often carry.

Speaker F Specific responsibility for providing a continuous service to managers concerned with analysis of data, forward financial budgeting and so on, so that managers have a continuous feedback on the quantitative results of their decisions. This is a service function to be given on demand to the limit of their resources. As with other services, this service to.

Speaker D Managers of a continuous analysis of data is, in some companies, carried out by those in the role of management accountant, now being set up in many organizations. When the situation is organized in that way, the management accountants usually expand their activities into areas not customarily covered by the financial accountant hierarchy. So long as such a management accountant is not accountable at law for tax matters and the preparation of the financial accounts, it's possible to play such a role subordinate to the Managing Director another type of role which appears frequently in large companies is that of the financial director. He may in fact be the company secretary under another title, but in some cases his work is in advising the managing director on such matters as the purchase of other companies property, plant, new factories and in general, the allocation of financial resources and the timing of investment to maintain the best balance of activity. His role, in fact, begins to look like a high level programming staff officer to the group managing director. But both this role and that of the management accountants are outside the financial accounting hierarchies I have described. If these hierarchies were more widely understood, accountants would, I think, be more readily acceptable by managers. For example, monitoring, which is essential, can be mistaken for unjustified snooping. But the law and the in and revenue insist now we finish with the model of organization which we've built up so far.

Speaker A Interesting.

Speaker G It's rather an engineer's way of thinking through organisational problems, conceptual models.

Speaker C It has its points, but he's trying to fit everything into a rigid framework. A hermadou.

Speaker E Come on now, Anton.

Speaker A You think in models too, don't you?

Speaker F No.

Speaker C Wasn't he aware of it?

Speaker I These films are based on the results of research carried out in the Glacier Metal Company Limited, which have been in practice in the company for many years and which are described in detail in Lord Wilfred Brown's book Organization.