- B823_1Managing knowledge
Managing local practices in global contexts
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978-1-4730-0713-0 (.epub)IntroductionThis course looks at the management of local knowledge-generating practices. You will explore the processes that link practices to global contexts and learn to identify the key dimensions of globalisation and explore the implications for knowing how to ‘do things’ in a variety of contexts. You will go on to compare the approaches to managing and organising, based on universally applicable principles, with context-specific rationalities and look at how viable interpretations of reality might be contructed from a variety of different perspectives.This OpenLearn course provides a sample of postgraduate study in BusinessAfter studying this course, you should be able to:think critically about and be able to comment on processes by which local practices are situated within their wider contextsthink critically about and be able to comment on dimensions of globalisationthink critically about and be able to comment on the nature and significance of institutional rules of practicethink critically about and be able to comment on some differences between managing knowledge-generating practices in Anglo-American, Japanese and Chinese contextsthink critically about and be able to comment on implications of managing through multiple rationalities.1 The management of local knowledge-generating practices1.1 The wider contextThis course explores the management of local knowledge-generating practices with regard to their wider contexts. Although these local practices might be considered in terms of individuals acting and thinking as if they were autonomous, independent agents interacting with other agents, such practices are simultaneously shaped by shared skills and understandings. As Karl Marx pointed out, when the hero of Daniel Defoe's (1660–1731) novel Robinson Crusoe (Defoe, 1994, first published in 1719) was shipwrecked on a remote island, he managed to rescue items from the wreck – a watch, ledger, pen and ink – and recreate the life of a ‘true-born Briton’ (Marx, quoted in Brown and Duguid, 2002, p. 139). Crusoe encountered aggressive locals – ‘savages’ – who practised cannibalism, but he rescued one of their prisoners. He called him ‘Friday’ and tutored the former cannibal in the largely Calvinist Protestant work ethic. Thus, Crusoe struck a minor blow for globalisation: Friday became enrolled in the global expansion of the British way of life.Although Crusoe was the sole survivor of his shipwreck, he did not confront the challenge of survival without the benefit of a language and culture. His mental state was not that of the human mind at birth: a blank sheet of paper that was empty of innate ideas. On the contrary, Crusoe was able to think and reason in the manner of a respectable member of seventeenth-century English society. He was born in 1632 in York, England, to a ‘good family’. His father, an immigrant merchant of German origin, wanted him to take up the law, but he went to sea. Eventually, Crusoe became established as a successful plantation owner in Brazil – and the shipwreck that plunged him into isolation occurred on a mission to West Africa, where he planned to acquire slaves for his plantation. Hence, what he had learned, as an upstanding member of English society, seafarer and expatriate plantation owner, filtered what he saw on the island and thereby guided his sensemaking and actions. To be sure, the English foundations of his mental ‘frame of reference’ evolved during the 28 years, two months and nineteen days that he spent on the island. Yet, the ‘savages’ whom he encountered knew nothing of England. Their behaviour had been forged in a context that was hitherto untouched by the influence of British society and included practices – such as cannibalism – that were predicated on different norms and expectations.Crusoe's relationship with Friday was not a matter of two independent people meeting for a rational discussion in a neutral environment; rather, it involved a fundamental clash of cultures as Calvinist values collided with cannibalism. Crusoe's perspective on what constituted acceptable ‘rules of practice’ gained the upper hand as Friday started to conform to his expectations. English imperialism – aided by firearms technology that Crusoe had salvaged from the wreck – triumphed: Friday renounced cannibalism and learned to call Crusoe ‘master’. Nevertheless, Crusoe's globalisation of the English way of life involved mutual engagement with Friday: they were both enrolled in the joint enterprise of survival on a remote island that was visited by cannibals. Crusoe taught Friday to speak English and took pleasure in his progress:Besides the pleasure of talking to him, I had a singular satisfaction in the fellow himself; his simple, unfeigned honesty appeared to me more and more every day, and I began really to love the creature; and on his side, I believe he loved me more than it was possible for him ever to love anything before.(Defoe, 1994, p. 210)
For his part, Friday possessed highly relevant knowledge about the habits of local cannibals and taught Crusoe survival skills. Their mutually interdependent struggle for survival generated shared experience that was held in common by both men. This provided a common reference point for making sense of the here-and-now and anticipating what might happen next. Gradually, Crusoe and Friday developed a stock of common experience that included language. Suddenly, they could talk about a world that went beyond the here-and-now: they could speculate about the past and future, along with events in other places.Eventually, Crusoe managed to rejoin seventeenth-century English society and was able to recount his adventures, but the audience's capacity to align its imagined impressions of life on the island with Crusoe's experience would have been limited. In an era when most people spent most of their lives within a day's travel of where they were born, and (given the limited role of print media) most information moved by word of mouth, constructing accurate images of life elsewhere would have been a formidable challenge. Crusoe's story illustrates how different rules of practice in other places can allow activities – such as cannibalism – that were absolutely abhorrent and unimaginable in civilised English society. Yet, the same ‘civilised’ society accepted the practice of slavery.Social norms are not absolute, universal or unchanging. Progress in science and technology, for example, raises new possibilities – such as human cloning – that challenge the viability of established norms. Institutional rules of practice, or what Nobel Laureate in Economics, Douglass North (1990), has famously called ‘the rules of the game’, comprise informal and formal constraints that ‘create order and reduce uncertainty in exchange’ (North, 1991, p. 97). Institutions link past practices to the present and future but, in the process, the rules of play are themselves subject to new interpretations, evolution and change.The roots of the word ‘institution’ derive from the Latin instituere meaning establish, arrange or teach. Although ‘institution’ is used in a variety of ways, our principal concern in this course is with institutions as established laws, practices or customs. Making sense of different institutional contexts, and the processes by which they are situated in their wider environment, raises important questions about the way in which boundaries between different ways of doing things are achieved and maintained. Where does one context stop and another start? Who is inside or outside of any given context? Although institutions are often associated with the sovereignty of nation states, any space (real, virtual or a combination of the two) within which individuals are meaningfully connected embodies the potential to generate its own institutional rules of practice. You may be familiar with the Western concept of ‘communities of practice’, this course draws on the examples of Japanese ba (which roughly means ‘place’, with the connotation that it is the ‘interaction space’ for purposeful activity) and Chinese guanxi (‘relationship’) as examples of bounded zones of communication, in non-Western contexts, that rely heavily on highly aligned tacit knowing among insiders who know each other well.
Knowledge needs knowers – people – who possess the capacity to think and act in any given context. While certain aspects of the knowledge possessed by people involves conscious thoughts that can be represented as information and communicated to others (so-called ‘explicit knowledge’), Michael Polanyi (1974, 1983) argued that the capacity to think and act in any given time and place is always guided by tacit knowing. Although we cannot be conscious of tacit knowing in any objective sense, its existence is revealed in our ability to ‘do things’ – such as recognising our friend's face or breaking into spontaneous laughter – even though we are not conscious of how we recognised our friend or why we laughed. Of course, we can construct after-the-event explanations that describe our friend's facial features or explain the basis of our humour, but this will be, at best, only a partial picture: ‘we can know more than we can tell’ (Polanyi, 1983, p. 4, original emphasis). Furthermore, these constructions of what we might have known tacitly are always historical, whereas the actual occurrence of tacit knowing is always instantaneous: it is situated in the here-and-now of specific circumstances.Tacit knowing can be honed by ‘doing things’ in practice: practice makes people better at things – if you practice mental arithmetic or a particular type of snooker shot, your performance tends to improve. As Gill has pointed out in his commentary on Polanyi's philosophy, we learn by doing:In learning a new dance step, a new language, or how to think philosophically, there simply is no substitute for practice. We imitate, are corrected, try again and again, get corrected again, and gradually get better at the task. Perhaps the ultimate example of this process is exhibited by those folks who are trained to be ‘chicken sexers’.Even though there is no simple way to tell the sex of a tiny chick, people can be taught to sort the males from the females by apprenticing themselves to those who already know how to do so. Their awareness becomes a function of their activity.(Gill, 2000, p. 43)
Gill's example of the ‘chicken sexer’ might also be used to reflect on the difference between knowledge that is possessed by individuals and the significance of an alignment of knowing across the wider community of people who can differentiate competently between male and female chicks. Individuals learn the craft by being apprenticed to experienced chicken sexers. Thus, they would have something in common, for example, if they struck up a chance conversation with somebody who also turned out to be a chicken sexer. In a similar way, children learn to speak by generating knowledge that is aligned with those who already share the capacity to use the language in question. At one level, language might be associated with the words of an individual speaker, but its development and use depends upon a collective dimension. Communication implies that message senders and receivers share the capacity to interpret information signals in a roughly similar way. (A personal or ‘private language’ would be a contradiction in terms, if it could not be used to communicate with anybody else.)According to Etienne Wenger (2003, p. 80), shared experience within a community of practice generates a ‘shared repertoire’ of communal resources that can be used as tools for enabling future practice. Arguably, such tools could be divided into an information dimension – such as shared language, specialist vocabularies, catch phrases, stories about great successes and failures, jokes, and so on – and the tacit dimension that enables practitioners to integrate the relevant information signals to accomplish the task in hand. In close-knit communities of practice, the tacit dimension can become highly aligned as practitioners come to share a similar way of interpreting and responding to information signals. Under such circumstances, emotional factors might be far more important than rational argument. Metaphors such as ‘team spirit’ reflect the sense of people thinking and acting as if they were in each other's minds. Although the potential advantages of ‘automatic management’ (for example, when the organisation's team does things without waiting to be asked) might be impressive, the embedded nature of highly aligned expectations about ‘the way that things are done around here’ can mean that such practices are difficult to change or cause the team to become the prisoner of ‘group think’.Within the broad sweep of global progress towards the industrial era, Western theorising about managerial processes associated with its pioneering development of large organisations – governmental, military, business, and so on – tended to overlook the social dimension of community relationships in favour of an emphasis on the rational management of individuals. Many such attempts assumed that there is – or there must be – ‘one best way’ to organise: a universally applicable solution to the challenge of managing the modern organisation (Drucker, 2001, pp. 9–16). Frederick Winslow Taylor's (1998) Scientific Management (first published in 1911) could be reinterpreted as an early attempt to manage knowledge, while the German sociologist, Max Weber (1864–1920) argued that rational principles of bureaucracy offered compelling advantages (see Clegg et al., 2005). However, the apparent globalisation of capitalism and bureaucratic organisational forms does not necessarily mean that adopters have reproduced Western-style rules of practice: the power that is mediated by aligned tacit knowing within Japanese ba and Chinese guanxi is not necessarily diminished if their respective members eat at McDonald's.Today, it is increasingly difficult to find parts of the world that have not been touched by globalisation. You can buy a Big Mac in Moscow, rent a Blockbuster video in Beijing and eat Kentucky Fried Chicken within sight of Egypt's Sphinx. Twenty-four-hour-a-day news can make distant places appear more familiar and some observers might equate this with Marshall McLuhan's (1964) vision of a ‘global village’ in which radio and television extend an individual's central nervous system towards a ‘global embrace’. Thus, McLuhan argued that these media made it possible to connect with events on the other side of the world more easily than across the local community or village. However, seeing another culture on a television screen is no guarantee of understanding it. Making sense of other peoples’ thoughts and actions takes imagination and interpretive understanding – which involves grasping intended meaning in their terms rather than in your terms and being able to translate between the two. For example, the USA's ‘war on terror’ reflects the global reach of armed conflict: wars are no longer confined to a specific geographical location. The USA and its allies can bomb anywhere on the planet, while their adversaries can cause carnage through lower tech, but no less fearsome, weapons. While ceaseless detail about the latest ‘victories’ and ‘advances’ in this war criss-cross the world through television, the internet, radio, print and other media, the interpretation of what is a ‘victory’ or a ‘defeat’ is shaped by one's mental frame of reference, what one watches, where one watches it and with whom. McLuhan thought that the medium was the message – but he missed a vital point: when transmitted through exactly the same images, events that can cause sorrow and devastation in one cultural context may be an occasion for rejoicing in another.The discontinuity between outsider and insider perspectives can act as a barrier that frustrates communication or reinforces prejudices. Conversely, working to build mutual understanding across the divide can generate valuable opportunities for juxtaposing contrasting perspectives and developing new insights: each side might learn from the other. Roland Robertson and other leading commentators have referred to the interaction of the ‘global’ and the ‘local’ as ‘glocalisation’ – the simultaneous presence of both universalising and particularising tendencies (Robertson, 1997). Thus, the decision by McDonald's to use the popular French cartoon character, Asterix the Gaul, to promote its operations in France, is an example of glocalisation in which the global influence adjusts to local requirements. Eating a Big Mac in a Paris McDonald's could make you feel as if you are anywhere in the world – and, in countries such as France, that is what McDonald's might want to redefine through glocalisation. The popular image of French gourmet food, carefully and creatively crafted by accomplished chefs, is at odds with McDonald's emphasis on standardisation. Moreover, a distinctively French variation on fast food is available in the form of freshly baked French bread that reflects the know-how generated locally by small independent bakeries – as we will see later.Along with global influences reaching into local practices, glocalisation can also centre on local activities reaching towards global opportunities – as in the production of local handicrafts and souvenirs. However, discovering a ‘Made in China’ label on your souvenir model of the Eiffel Tower might be a salutary reminder that global interconnectedness is often a complex affair. For the American sociologist George Ritzer (2004, p. 163), glocalisation generates unique outcomes in different geographical areas and gets to the heart of what many – perhaps most – contemporary globalisation theorists think about the nature of transnational processes. Glocalisation involves the interpenetration of local practices and global contexts: it represents the space in which expectations about ‘the way that things should be done around here’ interact with influences from elsewhere – whether in the form of information, ideas, music, the movement of people, capital, military interventions or other factors that cause local people to do things in a different way. The central theme of this course concerns the complex interrelationship between ‘doing things’ – practices – in the here-and-now and the myriad connections and influences that situate those practices within the wider world.
Section 2 explores some dimensions of globalisation: including the diffusion of standard products in a global market, ‘McDonaldisation’, glocalisation and the concentration of local expertise in geographical clusters. In Section 3, we consider processes that connect people together. Along with participating in different nested and overlapping communities of practice, people identify with ‘imagined communities’ (Anderson, 1991), such as nations, which comprise vast numbers of people whom they could never hope to meet. In this respect, globalisation involves the intermingling of previously separate contexts and redefines or transcends traditional boundaries. From the point of view of managing knowledge, essential issues arise with regard to the role of tacit knowing, in any given context, and the appropriateness of rational decision-making models – reviewed in Section 4 – based on universally applicable principles. Section 5.2 uses a case study of France's small, independent bakeries to illustrate alternatives to the ‘one best way’ approach.1.2 AimsThe aims of this course are:
to explore the processes that link local practices to global contexts;
to identify key dimensions of globalisation and explore its implications for knowing how to ‘do things’ in a variety of contexts;
to compare approaches to managing and organising, based on universally applicable principles, with context-specific rationalities;
to illustrate how viable interpretations of reality might be constructed from a variety of different perspectives.
2 The dimensions of globalisation2.1 IntroductionGlobalisation is used in different contexts to mean quite different things. According to the prestigious Economist magazine's Pocket Strategy: The Essentials of Business Strategy from A to Z, globalisation is: ‘The marketing of uniform products around the globe, based on an idea put forward by Harvard's Theodore Levitt in an article published in the Harvard Business Review in 1983’ (The Economist Books, 1998, p. 88). In his article ‘The globalization of markets’, Levitt (1983) argued that companies must learn to operate as if the world were one large market. For Levitt, the founder of the Ford Motor Company, Henry Ford, had been vindicated in his idea that customers could have any car painted in any colour that they wanted, so long as it was black. Successful companies should not waste time and money trying to meet local tastes, but had to accept the inevitable and opt for standardised products.In an increasingly interconnected world, globalisation internationalises the interests of powerful corporations – moving capital, technology and management practices across national borders – reshaping the nature and basis of interaction among nation states. However, the legacy of ethnic and religious struggles, colonial conquests and empires, armed conflicts, movements of people and many other historical factors mean that some nations are ‘closer’, in terms of their culture, than others – the impact of globalisation is far from uniform. Moreover, the alignment of cultural factors (such as shared religious beliefs) among people in different nations might link them in ways that overlap, and possibly surpass, different national identities. In terms of managing knowledge, the complexities of interconnectedness have considerable implications for effective transglobal communication and the capacity to achieve a difference – the practice of power – in different local contexts.At the intergovernmental level, bodies such as the United Nations face new challenges, for example, as the global dimensions of the US ‘war on terror’ transcend established rules of practice. Today, globalisation means worldwide integration in virtually every sphere (Parker, 2003, p. 234). Goran Therborn defines globalisation as 'tendencies to a worldwide reach, impact, or connectedness of social phenomena or to a world-encompassing awareness among social actors’ (Therborn, 2000, p. 154, original emphasis). Similar sentiments are evident in Frank Lechner's definition, cited by George Ritzer, which proposes that globalisation is: ‘the worldwide diffusion of practices, expansion of relations across continents, organization of social life on a global scale, and growth of a shared global consciousness’ (Ritzer, 2004, p. 160).According to the winner of the 2001 Nobel Prize for Economics, Joseph Stiglitz, who has also been a Senior Vice President of the World Bank and Chairman of President Clinton's Council of Economic Advisers, globalisation is ‘the closer integration of the countries and peoples of the world which has been brought about by the enormous reduction of costs of transportation and communication, and the breaking down of artificial barriers to the flows of goods, services, capital, knowledge, and (to a lesser extent) people across borders’ (Stiglitz, 2002, p. 9). Stiglitz (2002, p. 20) argues that, in itself, globalisation is neither good nor bad – for countries in East Asia, such as Japan, that have embraced globalisation on their own terms and at their own pace, it has brought enormous benefits; for many others, it seems closer to an unmitigated disaster. For example, liberalisation policies, designed to facilitate the free movement of capital, created circumstances in which a speculative attack on the Thai currency (the baht) spread quickly to undermine confidence in all the convertible Southeast Asian currencies (that is, currencies that can be quickly and easily bought and sold using other currencies).The liberalisation of capital markets makes it possible for international investors to move their money from one country to another with the click of a mouse, but the sudden withdrawal of funds from one country – so-called ‘capital flight’ – can undermine confidence in the local banking system and paralyse economic activity. Mindful of these dangers, the world's two largest developing economies – China and India – have resisted pressures to introduce convertible currencies. For Stiglitz (2002, p. 125), ‘It is no accident that… [w]hile developing world countries with liberalized capital markets actually saw their incomes decline, India grew at a rate in excess of 5 percent and China at close to 8 percent.’ Testimony to the importance of a nation's local knowledge about local practice might be taken from the case of South Korea, which is one of the nations that suffered as a result of the 1997 Southeast Asian currency crisis but ignored ‘universal’ solutions proposed by the International Monetary Fund (opting to recapitalise its largest banks instead of closing them down) – and, according to Stiglitz (2002, p. 17), this is part of the reason why South Korea recovered relatively quickly.2.2 Standardised productsWhile Theodore Levitt's (1983) classic article about the globalisation of markets accepted that there are fundamental disparities across different local contexts that have to be accommodated (for example, Japan's auto exporters had to adjust to the fact that the USA and continental Europe, unlike Japan, drive on the right), he argued that there was an underlying uniformity in human tastes. Levitt's vision of the globalisation of markets was that it created opportunities for firms to offer globally standardised products that are advanced, functional, reliable and low priced. Accordingly, the introduction of automatic washing machines in the UK, France, (what was then) West Germany and Italy should not focus on local traditions, but on the definition of standardised product-performance characteristics. Common denominators (in this case, the desirable product performance characteristics of a standard washing machine) should transcend local preferences. For Levitt, globalisation was a matter of accepting the inevitable death of differentiation: ‘Regardless of how much preferences evolve and diverge, they also gradually converge and form markets where economies of scale lead to reduction of costs and prices’ (Levitt, 1983, p. 102).In Levitt's analysis, differences between Italy's apparent preference for small-capacity washing machines without built-in heaters, on the one hand, and (what was then) West Germany's effective promotion of high-priced, high-performance brands, on the other, were beside the point. Such differences should not compromise the fixing of universal tastes. Universal needs should be translated into a standard product that exploited economies of scale. Levitt underscored his point with colourful illustrations:Modernity is not just a wish but also a widespread practice among those who cling, with unyielding passion or religious fervor, to ancient attitudes and heritages.Who can forget the televised scenes during the 1979 Iranian uprisings of young men in fashionable French-cut trousers and silky body shirts thirsting with raised modern weapons for blood in the name of Islamic fundamentalism?In Brazil, thousands swarm daily from pre-industrial Bahian darkness into exploding coastal cities, there quickly to install television sets in crowded corrugated huts and, next to battered Volkswagens, make sacrificial offerings of fruit and fresh-killed chickens to Macumban spirits by candlelight.During Biafra's fratricidal war against the Ibos, daily televised reports showed soldiers carrying bloodstained swords and listening to transistor radios while drinking Coca-Cola.In the isolated Siberian city of Krasnoyarsk, with no paved streets and censored news, occasional Western travelers are stealthily propositioned for cigarettes, digital watches, and even the clothes off their backs.The organized smuggling of electronic equipment, used automobiles, western clothing, cosmetics, and pirated films into primitive places exceeds even the thriving underground trade in modern weapons and their military mercenaries.(Levitt, 1983, p. 93)
For Levitt (1983, p. 102), technology helps to determine human preferences, while globalisation shapes economic realities by producing standardised products that meet these preferences. The clear implication is that the losers will be those who cling to local ways, while the winners will be those who align their practices with universalism and convergence. Increased access to communications and travel meant that a world that had been largely ignorant of modern products had become aware of what was available in the world's leading economies. While Levitt acknowledged that the development of flexible factory production technology would enable large-scale plants to change the specifications of products quickly, he saw customised products and rapidly changing designs as merely a possibility, noting that: ‘possibilities do not make probabilities’ (Levitt, 1983, p. 96). Hence, supporters of Levitt's perspective might celebrate the apparent ‘death of differentiation’ as the gateway to unparalleled economies of scale.Activity 1Levitt (1983) viewed globalisation as a process of convergence in which standardised products coalesced with ‘universal tastes’ to yield compelling economies of scale. To what extent do you feel that globalisation implies an inevitable move towards standardised products? Is there scope, for example, to use technological innovation to generate new market ‘needs’ through innovative products and services?You might like to make a note of your answer and review your thoughts about the nature and significance of differences between ‘universal’ and ‘context-specific’ approaches to knowledge and knowing as we work through this course.Levitt's focus on the globalisation of markets for standardised products that appeal to ‘universal tastes’ suggests that there is a single best way of meeting consumers’ needs. Accordingly, global companies compete on price to supply standard products that diffuse across the global market as marginal purchasers become more affluent and/or sensitive to the attractions of ‘modernity’.To be sure, Coca-Cola and McDonald's Big Mac hamburgers are regarded by many as global icons that are prized for their consistency: they simultaneously signify the nature of the product and symbolise an image that is ‘self-giving’ (Polanyi and Prosch, 1977, p. 74), in the way that a national flag is self-giving. If we focus our attention on canned or bottled Coca-Cola, a Big Mac or our national flag, we tacitly integrate many subsidiary details that underpin our construction of what each item represents. By definition, we do not know exactly what we are tacitly integrating – nevertheless, another type of fizzy drink, meat sandwich or an unfamiliar national flag is unlikely to replicate the self-giving image of the branded or familiar product. Trying to tinker with established iconic images can be counterproductive – when Coca-Cola introduced ‘New Coke’ in April 1985, customers rebelled: Classic Coke was reintroduced six months later.Brands are ‘built in the mind’ and these mental constructions are often shaped by substantial advertising campaigns that seek to influence the way in which consumers construct their perceptions of the product or service. For example, the market for bottled water is in part segmented by attempts to link the product to factors such as lifestyle and brand image. This may have little to do with the notion of ‘better’ tasting water. The ‘need’ for a particular brand of bottled water is not universal in the sense that the need for safe drinking water is universal.However, many aspects of today's globally interconnected world reflect a more complicated picture. Although numerous standard products and services do indeed compete mainly on price and/or branding, other segments of global markets are distinguished by fierce competition centred on innovative products and services. Dramatic reductions in product life cycles, coupled to innovative performance characteristics and design features, mean that new products become obsolete long before they wear out. The race to develop new and improved products and services depends on meeting a moving target of user expectations, as out-of-date models fail to compete effectively.Thus, there are substantial differences between efforts to globalise the innovative features of, for example, gourmet meals or specialist computers and fast food or standardised PCs. Although advances in information and communication technologies (ICTs) are often associated with global convergence on standardised ways of ‘doing things’ – as we will see in the next section – they can facilitate the expansion of specialised products and services. Also, institutional rules of practice (such as those that confer legitimacy on Japan's company-as-family workplace organisations, Chinese guanxi relationships or French bread making) can mediate power in ways that tend to act against pressures for global convergence.2.3 McDonaldisationGeorge Ritzer (1993; 2004) has coined the term ‘McDonaldisation’ to describe the way in which, increasingly, things are produced in similar, standardised ways, updating, amplifying and extending Weber's theory of rationalisation. Ritzer points out that he does not bear any particular animosity towards McDonald's: ‘It is no better or worse than most other fast-food restaurants and other manifestations of the rationalization process. I have labeled the process of concern here "McDonaldization" because McDonald's was, and is, the most important manifestation of the process’ (Ritzer, 2004, p. xiii).Certainly, McDonald's has an impressive global presence: in 2004, there were more than 30,000 branches of McDonald's in 119 countries. It has also become a symbol of American capitalism and, on occasions, a focal point for anti-American or anti-capitalist protests. For example, in 1999, the world's media were filled with pictures of Serbs smashing windows at two McDonald's restaurants in Belgrade, while nearby stores featuring American products (Levi jeans and Harley Davidson motorcycles) were untouched and operated normally (Ritzer, 2004, p. 206).In the late 1960s and early 1970s, Daniel Bell and others argued that advanced industrial countries had moved to a post-industrial society in which there is a shift from industrial age manufacturing to the provision of services. Since then, industrial age employment has declined dramatically in leading Western economies and there are growing expectations that knowledge age work and the creative contributions of knowledge workers will signal a departure from the modern bureaucratic organisation associated with fixed rules and the production-line assembly of fixed components. In contrast, the postindustrial organisation will reflect postmodern influences such as more flexible, ‘flatter’ organisational structures and more permeable boundaries between insiders and outsiders that allow knowledge generation by networking across traditional boundaries. However, Ritzer argues that low-status service occupations are central to today's ‘McDonaldised society’ and show no sign of disappearing: ‘the postindustrial thesis is not wrong but is more limited than many of its adherents believe. Postindustrialization coexists with McDonaldization’ (Ritzer, 2004, p. 191).The model of McDonald's is a metaphor for a highly rationalised approach to business processes ‘by which the principles of the fast-food restaurants are coming to dominate more and more sectors of American society as well as the rest of the world’ (Ritzer, 1993, p. 1). It does not stop at the fast-food store but spreads to all areas of everyday life: to recreation, informal and interpersonal relationships, and even love and intimacy. For example, the practice of ‘speed dating’, in which potential partners gather for a production-line style of short face-to-face meetings with each other (as a basis for exploring whether they would like to get to know the other person better), commodifies and speeds up the normally time-consuming process of meeting a variety of people. Thus, even those places and activities that used to offer some release from a routinised world have now been rationalised.For Ritzer, McDonaldisation symbolises the commodification of standardised products in an impersonal society. Indeed, The Economist magazine uses a Big Mac Index, based on the local price of a McDonald's Big Mac (the embodiment of a standard global product) in US dollars to illustrate disparities in the cost of living and the valuation of local currencies. Ritzer (2004, p. 7) notes that, in 2003, a Big Mac cost an average of US$2.71 in the USA compared with US$1.20 in China and US$4.52 in Switzerland – suggesting that the local currency was undervalued in China and overvalued in Switzerland.According to Ritzer, McDonaldisation embodies four principal processes: efficiency, calculability based on quantitative indicators, predictability as standard products are delivered in predictable ways, and control through non-human technology. Indeed, at one level, it is difficult to envisage global progress towards less efficient, less predictable, less quantitative economic processes based on less sophisticated technology.
Efficiency means utilising the least output to gain the highest return. In mechanics, where the term comes from, efficiency is defined in terms of minimising losses to extraneous physical activities, such as heat or friction in the transmission of energy. In business, efficiency implies instrumental rationality: given a goal, such as to maximise profits, what is the most instrumentally efficient way of achieving this outcome? Or in simple terms, if the organisation is a tool that is managed to achieve specific purposes, how can waste of resources be minimised around the tool's use? One way is to transfer the costs to the consumer. The McDonald's model dispenses with waitresses and offers only preformatted menus. Call centres reflect a similar principle: customers pay to be lined up to wait on the telephone, possibly for a long time, to speak to someone about their problem – although the person to whom they eventually speak is constrained by a menu of options on the computer in front of them. There is little scope to develop more than a superficial appreciation of the customer's problem.
Calculability means cheapening the assembly costs of the standard product. It is calculably cheaper to make reality TV shows where there is no script development cost and where there are no actors’ and agents’ fees, just a bunch of people happy to try to grab their fifteen minutes of ‘fame’ – or notoriety – along with possible opportunities for merchandising and promotional activities.
Predictability means that a McDonaldised service or product should be essentially the same anywhere in the world every time. There should be no surprises. It means leaving nothing to the imagination, scripting everything – ‘You want French fries with that?’ – and using standardised procedures to produce always standardised outputs. Every day at Disneyland should be just the same experience, irrespective of the ‘team members’ inside the suits, on the rides, or serving in the cafeteria. And the team members are typically young, cheap and interchangeable.
Control means minimising variation in every ingredient in the organisational assembly of people and things: customers and employees, raw materials, labour processes, and markets.
It often means substituting machine processes that are utterly controllable for people who are not. Where people cannot be eliminated, they can be drilled – in the manner of call centre operators and McDonald's staff – to always perform the same routines to a consistent standard. Moreover, the organisation can try to ensure that even physical appearance is controlled: Ritzer cites the example of the Euro-Disney employees who had strict rules applied about their weight-to-height ratios, facial appearance, hair length, jewellery, make-up and underwear. Control means learning to do and to be as one is told, even down to smiling on cue, as Mills (1996) demonstrates in his analysis of flight attendants.
McDonald's may be instrumentally rational as a profit centre, but its rationality might be viewed differently from other perspectives. It uses enormous quantities of grain to grow cereals to feed to cattle to kill in rationalised slaughterhouses (which were the original inspiration for Henry Ford's idea of the moving production line). It packs the burgers in sweet bread that some judge to be unhealthy and serves it in disposable containers (whereas conventional crockery and cutlery can be reused). Ritzer's McDonaldisation metaphor illustrates an approach to standardisation that has a global impact. For some, the triumph of routine predictability over uncertainty can be part of the appeal of McDonaldisation. As Ritzer (2004, p. 201) points out, the capacity to serve food almost instantly, or the ability of Amazon.com to deliver one of its million-plus books in a day or two, can be ‘enchanting’. However, the standardised approach discourages spontaneity, creativity and joy in discovery. When most things are reduced to the cheapest way of making them the same every time, there will be few surprises in store.Activity 2Regular customers at McDonald's typically know what they can expect and how much it is likely to cost. To what extent is McDonaldisation useful as a metaphor for effective knowledge management?As we noted, Ritzer's McDonaldisation metaphor embodies the amplification and extension of one dimension of Weber's theory of rationalisation in a bureaucratic organisation – that dealing with routinisation, standardisation and formalisation of tasks. From a knowledge-based perspective, the achievements of bureaucracies are typically tied to the organisation and its members having a clear idea of what they are doing: formal rules link the individual to the collective. If things stay the same, the established way of doing things might be reliable and robust; change threatens routine, however. When the context in which the bureaucracy operates changes and new modes of knowing are required to compete effectively, bureaucracies seem cumbersome, in the manner of giants lumbering across a landscape where the capacity to compete depends on agility rather than size. Being big and settled in steady routines is fine when the tracks of those routines extend seamlessly from the past into the future, much like a prairie road that stretches straight to infinity. In the Australian outback, ‘road trains’ (where a single truck pulls a succession of trailers) are great for transporting goods from A to B across relatively flat terrain where the road is straight and long and there is not much space on the road. In cities, where the directions are unclear, the competition intense and the space packed, their size becomes a major problem; operators have to disassemble the road train or transfer its goods to more appropriate vehicles. Bureaucracies are like these road trains: they consume vast amounts of resources to do one or two things efficiently under certain environmental conditions. Yet, if bureaucracies are suddenly exposed to rapidly changing operating environments, or have to do different things quickly, their lack of agility might become all too obvious. Agility requires a capability to maintain balance while changing course, to understand interpretively and act on many simultaneous cues, and to discard what is known in favour of what might be learned.Knowledge management in a bureaucracy might be seen as the arrangement of information about things that are already known. For a ‘steady-state’ organisation operating in a stable environment, the main challenge for knowledge managers might be ensuring that the right information is in the right place at the right time. Nevertheless, improving efficiency by moving information from one place to another is often more concerned with helping the organisation do better at what it already knows how to do than it is with its doing something entirely new. In contrast, innovation involves some degree of uncertainty: the lack of information that would be needed to make a ‘rational’ decision. In the absence of relevant information, people have to make a judgement based on their experience of ‘dwelling’ in the particulars of problems at hand. People who become familiar with a particular task (such as the ‘chicken sexers’ mentioned in Section 1.1) tacitly integrate clues that would escape the casual observer. Yet, the tacit knowing that is necessary to integrate the clues (and thereby perform in a competent manner) can take a long time to learn. Although the learning process might be facilitated by explicit information of the type that can be manipulated by knowledge management initiatives, the development of judgement depends on learning in practice. Would you trust an airline pilot who had done no more than read the manuals or flown on the simulator?Organisations that operate in rapidly changing environments typically require their staff to exercise a high degree of flexibility. Effective coordination using fixed rules and bureaucratic structures can be less than appropriate when the organisation's ‘pilots’ regularly have to fly in previously unimagined weather conditions. In the face of increased uncertainty – the lack of available information on which to make a rational decision – there is typically a higher premium on sound judgements. Moreover, if organisational insiders fail to generate broadly coherent judgements, the capacity of the organisation to act in a coordinated way – the supreme achievement of bureaucracy – can be undermined. In this respect, close colleagues who have worked together for a long time often generate a capacity to act as if they were in each other's minds: they develop a huge amount of apparently redundant knowledge about their colleagues that, nevertheless, enables them to imagine how their colleagues might respond when something unexpected happens. Yet, the capacity to know in practice’ cannot be objectified in the manner of a conventional asset.Innovation and creativity depend on the capacity of individuals and groups to integrate information in new and original ways. To the extent that McDonaldisation stresses standardised and fixed ways of doing things, it might be a good way to arrange information in a stable, efficient bureaucracy but less appropriate when managing uncertainty.Arguably, long before McDonaldisation occurred, the precursor for what has come to be known as knowledge management was evident in ‘Taylorisation’ and scientific management – as we will explore in Section 4.1.2.4 Glocalisation‘Glocalisation’ combines the words ‘globalisation’ and ‘localisation’ to emphasise the idea that a global product or service is more likely to succeed if it is adapted to the specific requirements of local practices and cultural expectations. The term started to appear in academic circles in the late 1980s, when Japanese economists used it in articles published by the Harvard Business Review. For the sociologist Roland Robertson, who is often credited with popularising the term: ‘glocalization means the simultaneity – the co-presence – of both universalizing and particularizing tendencies’ (Robertson, 1997, p. 4). However, the extent to which a global, lumbering, bureaucratic giant can command the agility necessary to communicate and compete in the local environment is often limited. Despite spending hundreds of thousands of dollars on market research associated with new product innovation, global firms can still get it badly wrong. For example, the automobile industry has made several attempts to brand its products with evocative names that call to mind rather different images in the local context. In the 1980s, Mitsubishi's award-winning Pajero four-wheel drive had to be renamed in Spain and Spanish-speaking Latin America owing to the name's unfortunate connotations, in the local context, as an offensive slang term.Although McDonald's is often cited as a clear example of standardisation, the president of McDonald's International has insisted that the company is ‘as much a part of local culture as possible’ (quoted in Ritzer, 2004, p. 179) and its standard menu has been glocalised to accommodate local foods. In the British case, this reflects the country's fondness for Indian food with offerings such as ‘McChicken Korma Naan’. Burger King, Wimpy and other hamburger outlets have also offered their own versions of Indian meals. Thus, the original glocalisation of Indian food for the British market has itself become the input for a new wave of glocalisation.McDonald's has also glocalised the way in which its restaurants are used. In Beijing, the menu is the same as in the USA, but the restaurants are presented as local places to linger, often for hours, over a snack. It organises children's birthday parties and employs female receptionists who deal with children and talk to parents. Indeed, in Japan, Taiwan and other East Asian outlets, customers have quietly but stubbornly transformed their local McDonald's into a local – or ‘glocal’ – establishment (Ritzer, 2004, pp. 179–80). In this respect, the expectations mediated by ‘local rules of practice’ have enabled a reinterpretation of an ostensibly ‘universal’ product and service, as Box 1 illustrates.Box 1 McDonald's in China: same product, different contextIn today's China, especially in the medium-sized and big cities, outlets for North American and European global brands are springing up quickly: McDonald's, KFC, Pizza Hut, Wal-Mart, Carrefour, Next, Etam and many more have become familiar. However, when you walk out of the shop, the trappings of Western business evaporate as you enter a China where the influences of cultural traditions that stretch back millennia remain robust. In 1990, McDonald's opened its first restaurant in China and now has over 400 outlets. Nevertheless, when Chinese people walk into McDonald's they take their traditions with them! Whereas many Western customers view McDonald's restaurants as the source of a quick and cheap meal, the Chinese typically make an occasion of going to McDonald's. Customers fall mainly into two categories: families accompanied by small children, and young couples on a date. Going to McDonald's is either a family event and a treat for children, or a place where young people can show off. The Chinese construction of what it means to have ‘a meal in McDonald's’ is not necessarily convergent with Western constructions of the same activity. From McDonald's point of view, the Big Mac is a standard product that is sold around the world: it fits with Levitt's (1983) concept of a standardised product in a global market. In contrast, customer constructions of what McDonald's means to them can vary significantly. In other words, even an emblem of global standardisation, such as McDonald's, can be read differently by different people in different contexts.2.5 ClustersA striking contradiction of the internet revolution is that, although cyberspace allows firms to be located anywhere, they still seem to cluster together in global cities such as New York, London and Sydney (Castells, 2001). Four years after publishing a book proclaiming The Death of Distance, Frances Cairncross noted in the book's second edition that, ‘Economists, most of whom have long ignored or despised economic geography, are now taking a fresh interest in it’ and, after reviewing the social significance of proximity, she suggests that, ‘In these ways, distance is far from dead’ (Cairncross, 2001, p. 203). Distance, it seems, can be dead and alive at the same time!In the case of ‘hot clusters’, such as California's iconic Silicon Valley, the advantages of participating in local communities of practice have helped to sustain the area's global significance: suppliers, knowledge workers and knowledgeable customers have been attracted by a robust reputation for innovation and new business opportunities. The benefits of being physically located within Silicon Valley are perceived to be worth the costs of relocation. However, the extent to which Silicon Valley can be used as a policy model, for establishing self-sustaining entrepreneurial networks in other areas, is controversial (Martin and Sunley, 2003; Newlands, 2003; Benneworth and Henry, 2004). For example, it is difficult to be clear about the difference between factors that helped Silicon Valley to become a successful cluster in the first place (‘getting going’) and those that help to sustain its success (‘success building on success’). Imitating the latter might not be a substitute for generating the former. Also, it is not always easy to see where the cluster stops and the rest of the world starts: apparently local activity might be connected to much more significant events elsewhere. Nevertheless, high-profile commentators such as Michael Porter (2000) have argued that the cluster model can be used to shape policy. Porter has acted as an adviser to the Organization for Economic Cooperation and Development (OECD), the World Bank and a number of national governments. According to Martin and Sunley (2003, p. 6), clusters have become a worldwide fad: a form of academic and policy fashion item.Clusters typically fall into three broad groups. First are highly competitive, traditional, labour-intensive industries, which are highly concentrated, such as Italy's textiles and clothing industry. Second are high-technology industries that often cluster around new activities, such as biotechnology in San Francisco, semi-conductors in Silicon Valley, scientific instruments in Cambridge (UK) and musical instruments in Hamamatsu (Japan). Third, services, notably financial and business services – such as advertising, films, fashion design, and research and development activities – concentrate in a few big global cities, such as Los Angeles, Tokyo, London, Paris, Sydney and Shanghai. Globalisation increases the competitiveness of these local economies by attracting international firms, thereby strengthening the cluster. Innovation may be encouraged through greater interactions between firms, suppliers, users, production support facilities, educational and other local resources.Today's extended access to transport and communication technologies allows even the smallest of high-tech start-up firms to grow in concert with overseas partners. Certainly, an important dimension to the movement of expertise emanating from clusters lies in so-called ‘brain circulation’ as knowledge workers move from one international centre of expertise to another. Such people include research scientists, new professional engineers, public relations executives, investment bankers, lawyers, real estate developers and creative accountants; management, financial, tax, energy, armaments, agricultural and architectural consultants; management information and organisation development specialists; strategic planners, corporate head-hunters and systems analysts, as well as advertising executives, marketing strategists, art directors, architects, cinematographers, film editors, production designers, publishers, writers and editors, journalists, musicians, television and film producers, and even a few global university professors (Reich, 1991). Transnational entrepreneurs, who spend significant time in different countries, form an important but often overlooked part of the globalisation process: they have experienced different contexts in the manner of insiders – although the degree of ‘insiderness’ might vary considerably, ranging from living a sheltered life in specially contracted complexes for expatriate workers, to becoming fully integrated members of local society.As recently as the 1970s, only the largest companies had the resources necessary to grow internationally (Saxenian, 2002). Yet, start-ups in Silicon Valley and other hot clusters are often globally connected from the outset. By 1998, one-third of the engineers and scientists in Silicon Valley's technology workforce were born outside the USA, mostly to Asian parents – prompting the quip that ‘IC’ refers not only to integrated circuits, but to Indian and Chinese engineers (Saxenian, 1998). What was once a brain drain, from Asia to the West, appears to become more akin to a brain circulation as immigrant engineers variously return home to Taiwan, China and, more recently, India, to exploit transglobal communication links to collaborate with their domestically based contemporaries (Bresnahan et al., 2001; Saxenian, 2002).2.5.1 Anglo-zone connectionsMuch of today's global interconnectedness has been shaped by the legacies of long-standing trading patterns, imperial expansion, colonisation and strategic military interventions. From the late seventeenth century to the mid twentieth century, Britain presided over the largest empire in global history – although expansion was tempered by adjustment as former colonies gained independence. With the benefit of hindsight, the American War of Independence (1775–1783) or the American Revolution, as it is called in the USA and Canada, in which the American colonists won independence from British rule, might be seen as sowing the seeds of a new global order.At the end of the nineteenth century, Germany's famous chancellor, Otto von Bismarck, expressed what proved to be remarkably prescient vision of Anglo-Saxon interconnectedness. Asked, in 1898, what he thought the decisive factor in modern history would be, he replied: ‘the fact that the North Americans speak English’ (Cairncross, 2001, p. 281). The legacy of colonisation and the rise of the USA as the world's sole superpower has contributed to a position in which English is the dominant or official language in more than sixty countries, and more people speak English as a second language than learn it as their native tongue – no other language has ever been in this position (Cairncross, 2001, p. 280).In some classifications, India is part of the Anglo-zone of countries that include substantial traces of English language and culture – making it relatively easy for functions such as telephone call centres to relocate to India where labour costs are relatively low. Meanwhile, the brain circulation of India's transglobal entrepreneurs returning from Silicon Valley and other high-profile clusters, offers the potential to transfer economically relevant expertise, generated abroad, to Indian contexts.Box 2 India's Anglo-zone connectionsIndia's recorded history stretches back to the third millennium BC. It has been punctuated by numerous invasions, including by the Turks, Afghans, Mongolians and Moghals, before the British, Portuguese and French who came as traders and then became rulers. The gradual evolution of Indian culture has been shaped by the influences of its invaders. For example, the Moghal legacy included a huge influence on Indian architecture and the Indian way of dressing, while 150 years of British rule left the English language, legal frameworks and bureaucratic models of organisation. Along with Hindi, English is recognised as an official language – although a further fourteen of the many languages spoken in India are recognised as official in certain regions. Against this background of linguistic diversity, English has emerged as a de facto standard for national, political and commercial communication. From a global perspective, this familiarity with English is a source of competitive advantage in the battle for transglobal outsourcing work – whether it be the relocation of telephone call centres from the UK or low-cost software engineers, in Bangalore or Hyderabad, working in concert with their US colleagues or counterparts in Silicon Valley.While the superficial signs of foreign incursions into India and the legacy of its 150-year period of British colonial rule are readily apparent, India's institutional rules of practice have been remarkably effective in perpetuating deeply ingrained beliefs within various sections of its fragmented population. The power mediated by tacit knowing generated in previous practices has proved to be remarkably effective in guiding the evolution of new practices along similar lines. Traditionally, India's social structure was characterised by division of labour on the basis of professional duties, but these divisions ossified into caste hierarchies that continue to riddle society despite efforts to improve merit-based access to opportunities.After its independence from Britain, India adopted a brand of socialism based on centrally planned import substitution aimed at mitigating some of the social consequences of capitalism on its poor. It was considered essential that the public sectors occupied the economy's ‘commanding heights’ and focused on building ‘temples of science’ in the form of universities and higher education institutes. One consequence is that education enjoys a positive image as the only gateway to upward social mobility. In postcolonial India wealth creation and businesses making profits were frequently frowned upon as social evils. Socialism gave way to ‘statism’ that precluded significant growth through entrepreneurship, leading to a brain drain as an Indian diaspora emigrated to advanced nations. Although many of these Indians did well overseas, until recently they appeared to be reluctant either to invest in India or to return home to the country that had frustrated their ambitions. Possibly the feeling was mutual? Members of the Indian diaspora are officially classed as ‘Non Resident Indians’ (NRI) – which has often been reinterpreted as ‘Non Required Indians’, reflecting a dim view of those who left to seek a different life. However, there are signs that India's newfound prosperity is softening attitudes. While India's economic base remains grounded in agriculture, it is simultaneously climbing the high-technology ladder. On this account, the transglobal mobility of its NRIs is facilitating direct access to high-technology practices in other contexts. A balance of payment crisis in 1990 prompted the beginning of economic reforms in India and some liberalisation of the economy. This cautious embrace of selected aspects of globalisation has helped India's fledgling information technology (IT) industry, and pharmaceutical and niche automobile suppliers. After the Indian economy's decade of miracle growth, Indians working abroad are becoming increasingly engaged with collaborations involving their domestic colleagues. Centres such as Bangalore and Hyderabad are no longer simply centres of abundant low-cost labour, but appear poised to become hubs of design and engineering skills. It has taken some time, but NRIs appear to be returning home in greater numbers with money, zest, specialist knowledge and entrepreneurial know-how.3 Institutional rules of practice3.1 InterconnectednessIn making sense of the stretch from the here-and-now to the wider context, social science has often seized on distinct levels: the micro – dealing with things that happen in organisations, for instance – and the macro or national level. Explanations are often generated at either the micro or the macro level and critical connections between the two are ignored (Flyvbjerg, 2001, p. 138). Arguably, increased talk about globalisation provides a convenient label for things that go on among nations – in a manner that transcends national boundaries – thereby making global a third rung on the micro-macro ladder. However, global interconnectedness typically means that local practice simultaneously overlaps with different aspects of the micro, macro and global. Twenty-four-hour, online, friction-free information flows across cyberspace to help to ensure that local practice is globally connected. Progression from the local is not simply a matter of climbing a series of steps on a ladder though; many organisational and national boundaries that were once taken for granted have become more permeable with increased movement of people and ideas – thereby blurring conventional distinctions between who is associated with which context.An essential part of ‘interconnectedness’ centres on what people have in common and the processes by which that common ground is used to communicate and generate new knowledge. On the one hand, members of a community of practice are assumed to be meaningfully connected with members whom they know through shared experiences and/or the exchange of information about similar experiences. Yet, on the other hand, members of much larger communities – such as nation states, ethnic groups, mainstream religions or the established professions – cannot hope to know more than a tiny fraction of people who might possess ‘mental models’ that are in some sense similar. In some cases, these similarities might be highly aligned, while in others they may represent no more than a faint trace. A practising scientist who adheres to the scientific method could reasonably imagine that there are many other practising scientists, across the globe, with a broadly similar view of the scientific method. Similarly, people identify with particular nations, cultures, causes, and so on, according to mental constructions that they imagine to be aligned with many people whom they will never meet.Since it was first published in 1983, Benedict Anderson's Imagined Communities has emerged as an influential text on nations and nationalism. Anderson is a professor of international studies and specialist on Southeast Asia, who was born in China and educated in the USA and UK. After noting the difficulties of defining a nation, he suggested an approach based on imagined communities:In an anthropological spirit, then, I propose the following definition of the nation: it is an imagined political community – and imagined as both inherently limited and sovereign.It is imagined because the members of even the smallest nation will never know most of their fellow-members, meet them, or even hear them, yet in the minds of each lives the image of their communion.(Anderson, 1991, p. 6)
Anderson goes on to explain that the nation is imagined as limited because ‘even the largest of them, encompassing perhaps a billion living human beings, has finite, if elastic, boundaries, beyond which lie other nations. No nation imagines itself coterminous with mankind’ (Anderson, 1991, p. 7). Furthermore, the nation is imagined as sovereign because ‘the concept was born in an age in which Enlightenment and Revolution were destroying the legitimacy of the divinely-ordained, hierarchical dynastic realm’ (Anderson, 1991, p. 7). While there had been eras in history when it was possible for certain Christians to dream of a wholly Christian world, recognition of the plurality of religions has given rise to dreams of clearly defined geographical territory that can be identified with the sovereign rule of the nation. Thus, sovereign nations have come to be aligned with geographical spaces, although the boundaries of these spaces might be subject to dispute. Lastly, the nation ‘is imagined as a community, because, regardless of the actual inequality and exploitation that may prevail in each, the nation is always conceived as a deep, horizontal comradeship’ (Anderson, 1991, p. 7). On occasions, this sense of imagined alliance among people of the same imagined nation can drive people to heroic sacrifices – including the willingness to die – in struggles with nations based on different imaginings.A nation as an imagined community traces a space whose innermost ways of being can be more or less easily translated globally. Where there are other spaces that bear a strong family resemblance to the community imagined, then translation will be easier and less frictional; for instance, between the Scots and the Irish, or the Welsh and the English – although, of course, propinquity and tangled histories often make estranged bedfellows. Think of the USA, Canada, Australia and New Zealand: although each has quite different histories, political institutions and economic roles in the world economy, they share a common lineage as English-speaking nations. The community that each nation's politicians, leaders and people imagine for itself shares family resemblances. However, in the case of a community whose imagination has long been shielded from the outside world, whose attempts at colonial expansion have been somewhat restricted, and whose language has not founded a global empire, then their imagined community might not translate so well as these others. Put simply, their institutions, in a word, are culturally specific rather than dispersed.Some groups of nations, as imagined communities, are regarded as linear extensions of other local contexts. For instance, shared Anglo-Saxon traditions might mean that North American films are appreciated in the UK and vice versa. Although, even apparently similar, contexts can differ considerably: as Winston Churchill famously remarked of the Americans and the British, they are two peoples divided by a common language. However, English language messages that flow easily from Sydney to London might struggle to convey the same meaning in Tokyo. The geographical distance is shorter, but the cultural divide is colossal. While it is possible to translate all of the English worlds into Japanese, no message can account for how it is interpreted: misunderstandings and disappointment can flow from interpretations of messages that were sent with the best of intentions.3.1.1 Global convergence?The Nobel Laureate, Douglass North (1990, p. 46), has argued that progress, from a less to a more complex society, is characterised by a lengthy and uneven but unidirectional move from informal institutional rules of practice to formal constraints. Thus, informal sanctions, taboos, customs, traditions and codes of conduct are superseded by formal rules embodied in constitutions, laws and legally enforceable property rights, including intellectual property and copyrights. North argues that the transition is related clearly to the increasing specialisation and division of labour associated with more complex societies.As the USA's long economic boom unfolded in the 1990s, the country seemed to be at the forefront of progress towards opportunities promised by the realisation of an information age and the knowledge economy. Fears that Japan had developed a new and superior form of capitalism subsided as Japan's miracle growth faltered in the early 1990s. Meanwhile, the dismantling of the Berlin Wall in 1989 signalled the end of four decades of Cold War and, as the former Soviet Union imploded, the USA became the sole global superpower. It seemed as if US-style liberal democracy had triumphed over the alternatives. For many of its advocates, globalisation emerged as a fighting ideology that extended the US ideals of free-market economics, liberal individualism and the rule of explicit written laws. The historian Niall Ferguson (2004) has argued that what he believes to be ‘the American empire’ now bestrides the globe in the way that the Colossus (one of the seven wonders of the Ancient World) was said to tower over the harbour of Rhodes. However, there are many areas of the world in which local expectations bear little resemblance to the Anglo-Saxon institutional rules of practice – and opinions about the inevitability or desirability of convergence vary considerably.For Peru-born economist Hernando de Soto (2000, p. 228): ‘capitalism is the only game in town. It is the only system we know that provides us with the tools required to create massive surplus value’. De Soto argues that four-fifths of the world's population continue to remain poor because they linger at the periphery of the capitalist game: ‘They have no stake in it’ (de Soto, 2000, p. 207). Although a greater number of them might wear Nike shoes or check their Casio watches, knowledge about credit and how to fund investments remains irrelevant: the local knowledge that counts is ‘how to survive’, often in the face of frightening adversity. On the other hand, we have the challenge of explaining how much of Asia has become rich when Africa, Latin America and former members of the Soviet Block have remained poor. Here we look first at de Soto's argument and then consider rules of practice in Japan and China.3.2 Institutions in fluxAlthough the implosion of the Soviet Union, after the dismantling of the Berlin Wall in 1989, has extended the flow of global capitalism, de Soto (2000) argues that the lack of capitalist institutions – and specifically legally enforceable rights to own property – has frustrated Western expectations about achieving increased prosperity through free-market economic development: ‘Ten years ago, few would have compared the former Soviet bloc nations to Latin America. But today they look astonishingly similar: strong underground economies, glaring inequality, pervasive mafias, political instability, capital flight, and flagrant disregard for the law’ (de Soto, 2000, p. 209). Meanwhile, much of Africa lies beyond the institutions of global commerce and contains many of the poorest nations on earth. Figure 1 shows the global distribution of poverty: the darker the colour, the greater the poverty.Symbolic representations of property (such as a valid credit card or a home-owner's mortgage account) make it possible to pick up the phone to reserve a hotel room or borrow money against the increased equity in a house or other asset. Your rights to legally defined property, including intellectual property covered by patents and copyright underpin market-rational transactions that drive capitalism, specialisation and the division of labour in the world's leading economies. However, the legally enforceable institutional infrastructure that connects symbolic representations of property to the power to ‘get things done’ (for example, through credit card transactions) does not extend to the vast majority of the world's population. De Soto (2000) estimates that completing more than 200 bureaucratic steps necessary to claim title to the land in a shantytown around Lima would take (working eight hours a day) something in the order of 21 years. His research also suggests that similarly long periods apply in such diverse countries as the Philippines and Egypt. Local institutions lack the capacity to translate local assets into the currency of globally recognised symbols.Possessing the icons of global capitalism – such as Nike shoes – is not the same as being a participating member of the capitalist process in which existing wealth can be used to produce additional value. In de Soto's analysis, the assets that could otherwise sustain local investment in the development and commercial exploitation of local resources cannot be converted into capital – and capitalism needs capital:When you step out the door of the Nile Hilton, what you are leaving behind is not the high-technology world of fax machines and ice makers, television and antibiotics. The people of Cairo have access to all those things.What you are really leaving behind is the world of legally enforceable transactions on property rights. Mortgages and accountable addresses to generate additional wealth are unavailable even to those people in Cairo who would probably strike you as quite rich. Outside Cairo, some of the poorest of the poor live in a district of old tombs called ‘the city of the dead’. But almost all of Cairo is a city of the dead – of dead capital, of assets that cannot be used to their fullest. The institutions that give life to capital – that allow one to secure the interests of third parties with work and assets – do not exist here.(de Soto, 2000, p. 16)
For some writers who have been concerned with the economic expansion of Asia, the problem of translating local knowledge into wealth need not rely on a cloned version of Anglo-Saxon capitalism.3.3 Asian alternatives3.3.1 JapanAfter the Second World War, the commander of the allied occupation of Japan (1945–52), General Douglas MacArthur, proclaimed in a September 1945 interview with the New York Times that ‘Japan will never again become a world power'; and, five years later, his economic experts advised that ‘the Japanese economy's best course in the postwar era would be to make “knickknacks” – their word – for underdeveloped countries’ (Fingleton, 1997, pp. 1–2). Today, Japan is a technological and economic superpower. It is the world's second largest economy and largest supplier of credit, whereas the USA, which is the world's largest economy and sole superpower, is also its biggest debtor nation. Meanwhile, Japan has developed a global reach. While firms headquartered in the USA continue to dominate Fortune magazine's listing of the 500 largest corporations in the global economy (there are nearly 200 US firms), Japan has about 100 firms, which is all the more remarkable considering that, half a century ago, it did not have any. Germany, France and the UK each have nearly half as many such firms as Japan, with numbers distributed around forty. Switzerland, Italy, South Korea and Canada each have about ten entries (Bergesen and Sonnett, 2001).Japan is the only G7 economy whose traditional institutionalised rules of practice owe almost nothing to Mediterranean origins. The Group of Seven, or ‘G7’, comprises a coalition of the world's major industrial democracies. It was originally the G6 – the UK, France, Germany, Italy, Japan and the USA – which met for the first time in 1975; but Canada joined in 1976 and, in 1998, the addition of Russia created the G8. When Commodore Matthew Perry delivered US demands to open trade relations in 1853, accompanied by the military threat of his ‘Black Ships’, he precipitated the decline of 250 years of unbroken rule by the Tokugawa Shogunate and ended Japan's period of self-imposed international isolation that stretched back more than two centuries. However, the Meiji Restoration in 1868 – which many take to mark the birth of modern Japan – was an adjustment to the established authority structure. It was neither a Norman Conquest nor a French Revolution (Mason and Caiger, 1972, p. 217). Under the slogan ‘rich nation, strong army’ (fukoku kyôhei), the Meiji government sought to establish a prosperous nation that remained free from Western colonisation. Japan learnt from the West but it did not adopt Western rules of practice.Against the background of Japan's miracle economic growth, the Japanese anthropologist, Chie Nakane (1972), published Japanese Society. Although many people in Japan and elsewhere might be quick to dismiss her account as stereotypical or outdated, it has been hugely influential and debated widely.Nakane developed her argument using the Japanese concept of ba – which roughly means ‘place’, with the implication that this is (i) the place where purposeful activity is situated, and (ii) connotes the frame of reference or field of interaction that emerges from the pursuit of that purposeful activity among a bounded community of insiders. Nakane (1972, p. 1) explains that this ‘frame’ or ‘field’ arises from people who deal with each other on a regular basis. For example, ba might arise from friendships among people who live in a particular locality or from some other kind of association; but, in all cases, participation in the ba generates a binding force that situates individuals within the group's frame of reference. Although individuals have different attributes, continual human contact within the ba can generate emotional forces that override purely rational considerations: ‘the power and influence of the group not only affects and enters into the individual's actions; it alters even his ideas and ways of thinking. Individual autonomy is minimized’ (Nakane, 1972, p. 10).Within Japan's workplace organisations, close community relationships among long-term colleagues lower the marginal cost of information transfer and enable insiders to act as a group, which in turn is able to ostracise and retaliate against those who break the group's code. In this respect, Nakane argued that the company-as-family workplace organisation – or kaisha – symbolises the focal point around which all other life revolves:In an extreme case, a company may have a common grave for its employees, similar to the household grave. With group-consciousness so highly developed there is almost no social life outside the particular group on which an individual's major economic life depends. The individual's every problem must be solved within this frame.(Nakane, 1972, p. 10)
Of course, many aspects of Japanese society have changed beyond recognition since Nakane wrote her book. Contemporary accounts, such as Yoshio Sugimoto's (2003) An Introduction to Japanese Society, for example, offer a more nuanced interpretation that addresses the dimensions of diversity.Along with other industrial societies, Japan is subject to centrifugal forces that tend to diversify its structural arrangements, lifestyles and value orientations (Sugimoto, 2003, p. 271). Nevertheless, the dramatic increase in the rate of changes that appear to make Japan look more like a liberal market-rational economy are offset by centripetal forces that drive Japanese society towards perpetuation of the status quo. In contrast to the American aphorism that ‘the squeaky wheel gets oiled’, in Japan gratuitous individualism is countered by each ba's capacity to ensure that members comply with group norms; as the famous Japanese saying has it: ‘the nail that sticks out gets hammered down’. Power, mediated by highly aligned tacit knowing among insiders (whether they be members of Japanese society, in general, or members of a particular company-as-family workplace organisation), acts in the manner of an unseen gyroscope that maintains the same angle of spin despite constant changes in the façade offered to outsiders.Established practices, in any tightly bounded collective, tend to shape what happens next in a reflexively ‘automatic’ manner, which can be remarkably difficult to change. Such practices often run ahead of explicit discussion about what ought to be done next, because everybody knows ‘the way that things are done around here’. However, the capacity of Japan's company-as-family workplace ba to exercise disciplinary authority over employees stems, in no small measure, from deeply embedded expectations that work should come before personal interests. Accordingly, the wives and dependants of regular male employees are accustomed to the idea that work comes first. For their part, employees who seek to redefine the work-life balance risk being hammered into line in the manner of nails that stick out.Japan's tightly bounded workplace ba (the Japanese language does not distinguish between single and plural nouns) put a premium on demonstrating emotional commitment to the work of fellow insiders. Outsiders might never be seen again and are not subject to the insiders’ disciplinary authority and implicit code of practice. Japanese organisations deal as a collective (‘us’) with the outside world (‘them’) through appropriate channels – such as the relationship with a supplier or customer – on a long-term basis, with repeat transactions providing an emergent ‘common sense’ of what constitutes acceptable action within each relationship. Social prohibitions against job-hopping and recruitment by poaching have thwarted the development of a significant labour market for specialists and allow organisations to take the cooperation of their permanent male employees for granted. Although an increasing number of permanent employees are leaving their jobs to work for foreign firms, such moves jeopardise trust with long-standing colleagues and the potential consequences tend to discourage all but the most determined. This has significant implications for the management of intra-organisational practice and limits insider interaction with sources of knowledge generated elsewhere. Thus, self-organising horizontal communities of practice and boundary-spanning networking initiated by self-motivated individuals acting alone (of the type that are taken for granted in Anglo-Saxon contexts) run counter to Japan's institutional rules of practice.Recently, Nonaka and his colleagues (Nonaka et al., 2000) have used the Japanese concept of ba to explore the insider dimension of knowledge creation within a shared context, such as a Japanese organisation. Such an approach embraces important qualities such as ‘love, care and commitment’ (Nonaka et al., 2000) that have often been overlooked in the English language literature on management and business practices.Activity 3In what ways might the challenge of managing knowledge in a Japanese company differ from managing knowledge in a UK or US company? You might like to make a note of your answer for future reference.Japan's company-as-family workplace organisations have evolved within the context of institutional rules of practice that contrast dramatically with their UK and US counterparts. For more than two centuries, Japan was shielded from the market-rational entrepreneurial processes that led the world into the industrial era, and many aspects of its 150-year transition from late feudalism to an economic and technological superpower reflect traditions that run counter to Anglo-Saxon expectations about liberal individualism and explicit rules backed by a legal framework.During its 250-year rule, the Tokugawa Shogunate developed a vertically segmented society in which authority flowed from the centre to the local area via a vertical hierarchy in which each level was accountable to the one above. Something of this top-down authority is evident in Japan's post-1945 ‘plan rational’ (Johnson, 1986, p. 19) economic development in which the governmental bureaucracy has been effective in coordinating the activities of a remarkably stable population of leading firms. An important consequence of stable relationships between company-as-family workplace organisations, together with limited labour mobility and horizontal networking (of the type associated with Anglo-Saxon boundary-spanning communities of practice), stems from the fact that people tend to deal with one another on a regular basis. Repeat transactions enable them to build high levels of trust associated with what Nonaka et al. (2000) refer to as ‘love, care and commitment’ (as mentioned above). However, if trust is broken, repeat transactions are put at risk and new suppliers or customers would be wary of dealing with an organisation that has violated the informal rules. Similarly, the fear of ostracism typically dissuades individuals from offending against the insider's implicit code.In the UK, USA and other Western contexts, leaders are often expected to ‘take charge’, articulate explicit policies, rise to the occasion, act quickly and be held to account for their actions. In contrast, decision making in a Japanese organisation typically takes a long time because many people have to be consulted in order to build a consensus, but implementation of the decision (when it has eventually been made) is usually swift and effective: everybody has a hand in its making and everybody is responsible for its execution. Success or failure is a collective, rather than an individual, responsibility.Arguably, Nonaka and Takeuchi's (1995) emphasis on Japan's knowledge-creating companies (as opposed to knowledge-creating individuals) is a reflection of Japan's institutional rules of practice and associated expectations concerning collective achievement. Put another way, in Japan, there is a sense in which the organisation – as opposed to the individual – is the more appropriate unit of analysis. This differs from UK or US rules of practice that privilege liberal individualism, impersonal market transactions and explicit communication. Indeed, there is often an expectation that organisational rules should be made explicit to the point where they allow any suitably qualified person to step straight into a job and perform in the appropriate manner.In summary, managing knowledge in a Japanese company typically places a higher premium on continuing long-term interaction among people who know each other well. This often relies more heavily on emotional commitment to the process of working with and supporting colleagues than would be the case in many UK or US organisations. Even in twenty-first century Japan, the lack of a significant labour market for specialists, together with a distrust of those who seek to further their careers by job-hopping, helps to maintain a sharp distinction between organisational insiders and outsiders. In contrast, the relative permeability of UK or US organisations to the movement of people and ideas tends to increase the degree of reliance on information from outside sources, formal rules and individual accountability. Indeed, there is often an expectation that jobs should be specified in such a way that any suitably qualified person could perform the tasks required. Expectations of labour mobility and a fluid labour market can mean that the know-how of key people can move from one organisation to another. In an extreme case there might be mass defections of essential staff – thereby undermining the type of aligned tacit knowing and sense of collective identity associated with Japanese organisations.3.3.2 ChinaWhen the medieval Italian traveller, Marco Polo (1254–1324), returned from China, he shocked Europeans with the news that the Chinese used not metal but paper money; indeed, European resistance to representative money based on paper notes stretched into the nineteenth century (de Soto, 2000, p. 222). While China might have had a few centuries away from the global limelight, it is currently staging the biggest economic boom in the history of the planet. In common with Japan, China runs a substantial trade surplus with the USA and represents an alternative to Anglo-American expectations about liberal individualism and free-market economics. China's 4,000 years of imperial rule, 40 years of Communist Party bureaucracy, and economic reforms that date from the late 1970s do not add up to free-market economics, but instead represent an autocratic route to modernity.China is the world's most populous nation with over 1.29 billion people. Such a huge quantity of labour, available at a low price, is China's key economic resource. In addition, China's size of 9 million square kilometres allows for a strong agricultural sector (16 per cent of gross domestic product, or GDP), while it also has large mineral reserves and the largest hydro-power potential in the world. It has an increasingly diversified industrial sector, with a shift from heavy (12 per cent of GDP) to light industry and a growth in the manufacturing sector (39 per cent of GDP) of the economy. The Special Administrative region of Hong Kong also means that China has control over one of the largest trade and financial services sectors in the world (32.5 per cent of GDP).The rising prosperity of the Chinese people has created a middle class of 300 million. This middle class wants to consume and the global costs of pollution caused by this consumption are astounding. Coal provides 70 per cent of energy in China and its car emissions standards are ten years behind those of Europe. Environmental degradation currently underway threatens China's productive capacity and quality of life.Half of China's workforce now works in the services or industrial sector of the economy, with a shift in the industrial sector from heavy to light industry. Labour mobility has contributed to globalisation with 31.7 per cent of the population being urbanised, while figures suggest that there are still 150 million unproductive employees in the agricultural sector. The sheer scale of changes in China's economy has far-reaching international implications. Economic development in China is reshaping international trade, while foreign investors who are eager to exploit opportunities generated by China's growing prosperity are confronting institutional rules of practice that put outsiders at a disadvantage: doing business in China depends on developing and maintaining appropriate relationships with insiders.Although Chinese words such as guanxi (relationship) have started to creep into the English language management and business literature (see Saxenian, 2003; Woetzel, 2003; Fu et al., 2004), it is difficult for outsiders to appreciate the practical implications of such terms. For example, in the UK or USA, legally binding written contracts are a cornerstone of business practice. However, in China, a contract is merely one part of a bigger picture – ‘getting things done’ depends on relationships: as Box 3 explains, you have got to have patience with guanxi.Box 3 China: You've got to have patience with Guanxi!
China's institutional rules of practice privilege implicit obligations to relevant groups over individualism and claims to individual rights of the type that might be taken for granted in the USA and the UK. From the point of view of management and business practice, this has at least two implications.First, in China, explicit rules can prove to be rather less effective than in the USA, the UK and other liberal Western democracies. Instead, unwritten understandings that are learned implicitly (that is, ‘independently of conscious attempts to learn and largely in the absence of explicit knowledge about what was acquired’ [Reber, 1993, p. 5]) play a fundamental role in mediating the use of power in Chinese contexts. These unwritten understandings routinely ‘overwrite’ formal rules.Second, the implicit learning necessary to benefit from the level of mutual understanding that is necessary to function effectively in Chinese society takes time: there is no quick-fix solution to building trust (although the trust build-up over years can evaporate instantly, if somebody offends against the implicit code). Implicit learning among people who deal with each other on a regular basis enables them to develop aligned tacit knowing: they ‘read’ signs and events in a similar way. They are able to imagine the intended meaning by reading between the lines and recognising the importance of what is not said. Understanding insider practice depends upon developing the capacity to act and think in the manner of an insider. Requisite trust represents a form of knowing that cannot be explained adequately in terms of information or ‘knowledge capture’. Such knowing relies on direct personal experience: if you have not done it, you cannot know what it is like. Building the trust necessary to experience guanxi requires serious displays of dedicated effort.
Guanxi is a Chinese business-networking concept that contrasts sharply with Western management and business practices. Literally, guanxi means ‘relationship’ and its principles extend to any type of relationship; it is also understood as the network of relationships among various parties who cooperate and are bound together by expectations of mutual support. Notwithstanding China's apparent embrace of practices that have the outward appearance of Western business, ‘getting things done’ in China depends on involvement with the right guanxi.Of course, China is hardly the only place where dealing with people whom you know and trust is essential to effective business practices. However, the degree of effort required to build requisite trust might surprise many Westerners. Whereas Westerners might rely on expectations about legally enforceable contracts and property rights to overcome the uncertainties involved in dealing with a stranger, the Chinese approach involves getting to know people to the extent where they are no longer strangers. Guanxi is a prerequisite of Chinese practice: without first establishing the necessary guanxi, nothing much can happen. Moreover, building guanxi is not a one-off project: once established, guanxi have to be nurtured and continually refreshed – thereby building deeper trust and making the whole thing easier for insiders to practice, but simultaneously harder for outsiders to penetrate. Unlike assets that are traded on capital markets, guanxi cannot be traded, but guanxi are economically significant in terms of the practices that they facilitate. Much of the knowledge generated in the course of guanxi activities might appear redundant. Yet, it provides a reservoir of shared understanding that surges forth unbidden whenever the time is ripe, thereby smoothing over difficulties and absorbing uncertainties. While guanxi's ostensibly redundant knowledge might constrict Western expectations of efficiency, it underpins considerable flexibility.4 Rational solutions4.1 Scientific managementFrederick Winslow Taylor, who is often regarded as the father of modern management, was an engineer, born of a wealthy Pennsylvanian family. He was expected to go into the law or some other genteel profession: instead he preferred to work on the shop floor. As he reflected on his experiences as a foreman in the Midvale Steel Works, he concluded that the workers knew more about the actual processes they were working on than their managers did. Workers could tell stories about why things were the way they were, and others had to accept these stories. Management knew about what the workers did, but lacked their here-and-now experience of the task in hand. In short, the workers knew something that the managers needed to know.Taylor's method of affording management control over the practice of workers involved studying each task to identify its essential components. Once managers had scientifically determined information about what workers were doing, they could engage with the task of managing those activities more effectively. In essence, this meant scientifically determining how to tackle the job in the most efficient manner. Taylor believed that scientific management provided the basis to benefit employers, by reducing their labour costs, and employees, who would be rewarded for increased output. However, the knowledge that mattered in this mutually beneficial employer-employee relationship was seen as the preserve of the manager. As Taylor so famously wrote of one of his favourite workers:Now one of the very first requirements for a man who is fit to handle pig iron as a regular occupation is that he shall be so stupid and so phlegmatic that he more nearly resembles in his mental make-up the ox than any other type … [t]he workman who is best suited to handling pig iron is unable to understand the real science of doing this class of work. He is so stupid that the word ‘percentage’ has no meaning to him, and he must consequently be trained by a man more intelligent than himself into the habit of working in accordance with the laws of this science before he can be successful.(Taylor, 1998, p. 59)
By defining workers as brainless and unthinking hands following orders determined elsewhere, the notion of decision making became both elitist and rational – rational in that it must lead to optimum decisions because it is based on, what was seen as, superior intelligence. It applied the scientific method, the hallmark of superior intelligence, to pursue the optimal achievement of desired organisational ends.In organisational terms, Taylor's approach to managing knowledge involved studying workers to the point where their skills could be broken down into component parts and managed in the most efficient manner possible. Scientific management changed workplace power relations. Whereas the workers’ know-how previously embodied scope for them to do things ‘their way’, scientific management enabled managers to specify the task.Taylor may be said to have laid the rational foundations, literally, for rationalised bureaucracies. He took craft knowledge as a basic resource for compiling information for managers. However, once the practice of performing a particular task had been reduced to rules, the scope for learning-by-doing was compromised. As we noted in our discussion of McDonaldisation, reducing tasks to their component parts and organising them according to ‘rational’ principles might be a recipe for efficiency, but organisations that emphasise efficiency might compromise creativity.4.2 BureaucracyBureaucracy as a concept has had an interesting career: it begins in France in the eighteenth century. By the nineteenth century, the German state constructed by its first Chancellor, Bismarck, was a model bureaucracy in both its armed forces and civil administration. Weber (1978) realised that the creation of the modern state of Germany had only been possible because of the development of a disciplined state bureaucracy and a bureaucratised standing army – innovations pioneered in Prussia – that became the envy of Europe. At the core of Weber's conception of organisation as bureaucracy was the notion that members of an organisation adhere to the rules of that organisation. He contrasted three types of authority, based upon the rule of charisma, the rule of tradition and the rule of rational, legal precepts.4.2.1 Three sources of authorityAccording to Weber, there were three major bases to authority.
Charismatic authority means that deference and obedience will be given because of the extraordinary attractiveness and power of the person. The person is owed homage because of their capacity to project personal magnetism, grace and bearing. For instance, management gurus such as Jack Welch, politicians such as Nelson Mandela, or popular characters such as Princess Diana are charismatic authorities: people follow them because of their personalities and the success they have achieved.
Traditional authority occurs where deference and obedience are owed because of the bloodline. The title held is owed homage because the person who holds it does so by birthright – they are in that position by right of birth. Prince Charles, for instance, is not so much an authority because of his charisma, but because of tradition: as the Queen's eldest son, he is the future King of England.
Rational-legal authority signifies that deference and obedience are owed not to the person or the title they hold but to the role they fill. It is not the officer but the office that is owed homage because it is a part of a rational and recognised disposition of relationships in a structure of offices. Examples are easy to find – one just has to think of passport control or the police. These are authorities, although one does not know the people acting in the roles: they are ‘secondary’ – what is important is the office they represent.
4.2.2 Rational organisationsThe third source of authority, based on rational-legal precepts, is exactly what Weber identified as the heart of bureaucratic organisations. People obey orders rationally because they believe that the person giving the order is acting in accordance with a code of legal rules and regulations (Albrow, 1970, p. 43). Members of the organisation obey its rules as general principles that can be applied to particular cases, and which apply to those exercising authority as much as to those who must obey the rules. People do not obey the rules because of traditional deference or submission to charismatic authority; they do not obey the person but the office holder. Whether one likes the office holder or not is supposed to be unimportant; police officers might sometimes be disagreeable, but they hold an office that legitimises their actions.Weber's view of bureaucracy was as an instrument or tool of unrivalled technical superiority. He wrote that ‘Precision, speed and unambiguity, knowledge of the files, continuity, discretion, unity, strict subordination, reduction of friction, and of material and personal cost. These are raised to the optimum point in the strictly bureaucratic administration’ (Weber, 1948, p. 214). Weber saw modern bureaucratic organisations as resting on a set of ‘rational’ foundations. These include the existence of a ‘formally free’ labour force; the appropriation and concentration of the physical means of production as disposable private property; the representation of share rights in organisations and property ownership; and the ‘rationalisation’ of various institutional areas such as the market, technology and the law.The outcome of this process of rationalisation, Weber suggests, is the production of a new type of person: the specialist or technical expert. Such experts gained control of reality by means of increasingly precise and abstract concepts. Statistics, for example, began in the nineteenth century as a form of expertly compiled information about everyday life and death, which could inform public policy. The statistician emerged as a paradigm of the new kind of expert, dealing with everyday things, but in a way that was far removed from everyday understandings. Weber sometimes referred to the results of this process as disenchantment, meaning the process whereby all forms of magical, mystical, traditional explanation is stripped away from the world. The world is laid bare, open and amenable to the calculations of technical reason. While Weber believed that the technical superiority of bureaucracy was irresistible, this irresistibility alarmed him. It seemed that achieving the benefits of modernity involved reducing everything to rational calculation irrespective of other values and pleasures. Yet bureaucracy seemed to be a necessary and unavoidable feature of organising in the modern world: if you wanted modernity, Weber suggested, you had to have bureaucracy.Box 4: Max Weber's fifteen dimensions of bureaucracy
Power belongs to an office and is not a function of the office holder.
Power relations within the organization structure have a distinct authority configuration, specified by the rules of the organization.
Because powers are exercised in terms of the rules of office rather than the person, organizational action is impersonal.
Disciplinary systems of knowledge, either professionally or organizationally formulated, rather than idiosyncratic beliefs, frame organizational action.
The rules tend to be formally codified.
These rules are contained in files of written documents that, based on precedent and abstract rule, serve as standards for organizational action.
These rules specify tasks that are specific, distinct, and done by different formal categories of personnel who specialize in these tasks and not in others. These official tasks would be organized on a continuous regulated basis in order to ensure the smooth flow of work between the discontinuous elements in its organization. Thus, there is a tendency towards specialization.
There is a sharp boundary between what is bureaucratic action and what is particularistic action by personnel, defining the limits of legitimacy.
The functional separation of tasks means that personnel must have authority and sanction available to them commensurate with their duties. Thus, organizations exhibit an authority structure.
Because tasks are functionally separated, and because the personnel charged with each function have precisely delegated powers, there is a tendency toward hierarchy.
The delegation of powers is expressed in terms of duties, rights, obligations, and responsibilities. Thus, organizational relationships tend to have a precise contract basis.
Qualities required for organization positions are increasingly measured in terms of formal credentials.
Because different positions in the hierarchy of offices require different credentials for admission, there is a career structure in which promotion is possible either by seniority or by merit of service by individuals with similar credentials.
Different positions in the hierarchy are differentially paid and otherwise stratified.
Communication, coordination, and control are centralized in the organization.
(Clegg et al., 2005, pp. 51–2)Activity 4To what extent is bureaucracy desirable? Select two organisations with which you are familiar and consider in what respects there are similarities between them with regard to each of Weber's fifteen dimensions of bureaucracy, given in Box 4 above. Which organisation is most bureaucratic?Weber saw that bureaucracy had several positive attributes, with much to recommend it. Organisations constructed in this way could be sources of satisfaction for those working within them: they were fairly predictable, and they offered opportunities for careers and for individual members to specialise in what they most enjoyed and to develop these skills.Bureaucracy offered several potential benefits:
It limited arbitrary power and privilege. Bureaucratic principles treated individuals on an equal basis according to precedents established by rules, rather than on the whim of an officer.
One had a right of appeal in a bureaucracy: if the application of rules to individuals was found to be illegitimate, they had rational recourse to an appeal mechanism.
None were above the law, none could escape rules and every office was accountable. In short, bureaucracy was a bulwark of civil liberty.
A cornerstone of bureaucracy for Weber was that it operated on an impersonal basis. At first sight, this phrase might confirm bureaucracy's negative image as a heartless, soulless and cruel method of organising. Bureaucracy does not have a human face: it makes everybody a number. However, Weber was arguing something far more fundamental. In essence, he was saying that it does not matter if one is black or white, Muslim or Jew, gay or straight, rich or poor, high-born or low-born. It does not matter who or what one is. One is entitled to be judged not on the prejudices of the community or the person applying a rule but strictly according to the rules, without regard for the specificities of one's identity. For many, impersonal rules without regard for persons are a fundamental bulwark of a decent, civil, liberal society.On the other hand, bureaucracy's abstract, impersonal rules could be more menacing than comforting, something to dread rather than celebrate for its guarantee of liberal freedom – for example, if one did not understand the rules being applied, or if the rules were not transparent, serving not liberty, equality and fraternity, but tyranny. Such possibilities were imagined by the Prague-born writer Franz Kafka (1883–1924) in his novel The Trial (first published, in German, a year after his death), where bureaucracies were seen as inscrutable and unknowing to those who became caught up in their machinations, and obsessive in their detail for those who despatched their business – or those parts of it that they were privy to.Many take the view that bureaucracy is simply unavoidable: the one best way to organise large-scale activities under uncertain conditions. However, the interpretation of bureaucratic principles varies according to the institutional rules of practice within which any given bureaucracy is embedded: Japanese or Chinese bureaucracies do not operate in the same way as their Western counterparts. No rule can account for the way in which it is interpreted in practice: the interpretation of rules, and the extent to which rules are overlooked or ignored, depends on practitioners acting and thinking in situ. Thus, the idea of ‘optimum solutions’ and rationalities based on universal principles might be contrasted with what actually happened in the here-and-now of local practices.5 Postmodern rationalities5.1 Decision makingDecision making is understood as management's main task. Usually, the model of decision making is described as a perfectly well-organised, rational and logical process. First, the problem is defined. Second, all the relevant information that leads to an optimal solution is collected. Third, reviewing the data, management (perhaps with the help of technocratic ‘experts’) develops several possible solutions. Fourth, evaluating the possible solutions carefully, management makes a decision regarding the optimal solution. Fifth, this solution is implemented in a top-down approach that is evaluated constantly by management. Such constant processes of rational decision making, supported by the latest ICT equipment and an army of analysts and consultants, are meant constantly and incrementally to refine and improve an organisation's processes and products. The problem of recalcitrant hands is solved by turning them into disciplined and reflexive extensions of the corporate body, able to exercise discretion, but in corporately prescribed ways.Although still in powerful circulation in today's organisations, the model of managerial decision making outlined above has been challenged by various contributions to management and organisation theory. James March and Herbert Simon (1958) doubted whether decision makers really look for optimal solutions. They suggested that they look for ‘satisficing’ solutions. Because of the limited capacity of human information processing, no one could really consider all solutions and then decide which one was the best one – not even a top manager. But top managers, because of their wide experiences, have a raft of comparable cases to draw on for most decision situations, and on the basis of that limited search are able to be rational within the bounds of their own experiences. However, having more experience, these bounds are less constraining than would be the case were lower-order members to do the deciding. In organisational life, a careful analysis of all available information would be impossibly time-consuming given that time (and motivation for such use of time) is a scare resource: it is for this reason that satisfactory rather than optimal decisions will be made. Simon and March saw people as having ‘bounded rationality’. By this they meant to establish a distinction from the conception of economic rationalism that was inherent in the orthodox views of economics. The economic view of rationality assumed that a person would make rational decisions on the basis of perfect knowledge about the nature of the phenomenon in question. This perfect knowledge would be contained in what economists call ‘price signals’, because all that one would need to know about broadly similar goods in perfectly competitive markets is how much they cost. A rational person would always buy the cheapest product, all other things being constant. This would be the optimal decision. But, in complex organisations, Simon and March argued, decision makers work under constraints that make optimal decisions impossible. They have imperfect knowledge: there is insufficient time to collect all the data they need. Their information-processing capacities are subject to cognitive limitations: they are not sure what they need to know, and so on. The result is that rationality is ‘bounded’ and decision makers cannot optimise but must ‘satisfice’ – make the best decisions that they can: those that are most satisfactory as it seems at the time, based on the available information.A group of French philosophers and writers, who have been labelled as postmodernists, have shown that our taken-for-granted concept of rationality is in fact just one approach to the rational, and that there are many other forms of rationality beneath the smooth surface of textbook knowledge and scientific jargon. One of the most influential of these, Michel Foucault (1979), thought that what we took to be rational was always an effect of the historically constituted ways of making truth claims that had become accepted as normal in a given society or locale, such as a profession or organisation. For instance, it was a truth of nineteenth-century medicine that the womb was the seat of female neurosis, hence the operation for its removal became known as a hysterectomy. Organisationally, whole apparatuses of nurses and medical staff were dedicated to the removal of wombs based on the certainty of medical knowledge whose truth no one accedes to today. In management more generally it was once a widely held truth claim that employees were paid to do exactly as they were told and for them not to deviate from prescribed practice; indeed, this was a cornerstone of Taylor's philosophy of scientific management.How do organisations, professions and practitioners perpetuate these truth claims and sustain the practices associated with them? One way is through the circulation of stories. For instance, Jean-Francois Lyotard (1984) emphasised that we make sense of the world through the use of narratives. However, as Lyotard argues, relying on one dominant story can lead us to forget or actively repress other potential narratives. The account of a visit to the Jenolan Caves in Box 5 illustrates this point.Box 5: Making sense of the Jenolan CavesBeing interested in the history of the caves, a European visitor to Australia's Jenolan Caves in the Blue Mountains near Sydney joined a guided tour. What he heard in the scientific treatise that followed in the next two hours was hardly exciting: the guide started a monologue on stalagmites and how they are formed over many million years – how earth movements over the last couple of million years, and micro-organisms kept hidden deep inside the waterholes in the cave, and so forth, made them possible. With Lyotard, this becomes understandable: what the guide did (and what probably most visitors expect from a guide) was to use the scientific template to make sense of what one can see in the caves. Viewed through a scientific lens, the caves started to resemble a laboratory, a showcase of how much the guide knew; but as a result a whole other reality was buried. The guide could also have told stories about indigenous people and the meaning of the cave for them, about the changes of use of the cave over the years, about the tragedies witnessed and comedies hosted over the centuries; about the local people and how they used the caves; about myths, secrets and stories that evolved around the cave. In short, the guide could have told many different stories about the cave, and the scientific story would have been just one. All these stories enact different rationalities, none per se is superior to the other, but through the domination of one story – the story of science – all the other stories become subordinated.Rationality is shaped by the local interpretation of prevailing institutional rules of practice. Insider judgements about the extent to which something is ‘right’ or ‘wrong’ are reflexively automatic: they rely on tacit integrations of subsidiary information ‘clues’ that reflect taken-for-granted expectations about what should, or should not, happen. In the same way that we can recognise our friend's face without being able to explain how we do this, insiders can recognise appropriate practice without being able to say what it is that they are recognising. Moreover, we can ‘see’, in an instant, when somebody does something questionable or an outsider fails to comply with our insider expectations.Practices that survive in an organisation are not necessarily efficient, nor are they, in any objective sense, ‘right’ or ‘wrong': they survive because they are embedded in the institutional fabric; they reflect ‘the way that things are done around here’. As we saw in Section 1.1, practices such as slavery and cannibalism were embedded in the prevailing social norms of Robinson Crusoe and Friday's respective societies: they were seen as legitimate by the standards of the time. Although there are obvious examples of accepted norms evolving over time (as the examples of slavery and cannibalism illustrate), many aspects of practice are embedded in ways that might not be clear to outside observers. Japanese and Chinese business etiquette, for example, each embody expectations that can surprise outsiders who are schooled in very different traditions. Even apparently similar contexts can embody forms of rationality that might not be immediately apparent to outsiders.5.2 Institutionalising French breadThe context-specific nature of rationality is such that, as we have just indicated, many insider norms are not apparent to outsiders. From the point of view of an organisation, the institutional rules of practice that prevail in any given context enable and constrain the dimensions of viable practice. Managers who try to do things that violate accepted norms about practices that insiders judge to be sacred or profane tend to encounter resistance. The capacity to achieve a difference – the practice of power – is normally intertwined with established expectations about what is, and what is not, legitimate. Organisations that have evolved in tandem with the evolution of institutional rules of practice might rely on practices that outsiders would judge to be irrational – yet, they ‘work’ in that particular context. The case study of French bread presented in the attached document below illustrates these points.Click the link below to open Institutionalising French bread (PDF of pages 52-56, 0.1MB)Institutionalising French breadThe French bread story is long and complex, yet it teaches us some profoundly important things. First, the boulangeries of France are small organisations in which the practice of bread making generates reciprocal expectations, on the part of both practitioners and their customers, that things will continue to be done in that way: it is socially embedded in the order of things. The boulangeries comprise a form of organisation that has proved to be capable of reproducing itself from generation to generation. Yet, to some outsiders, French bread making might appear to be irrational.For the bakers, the costs are high. They have to endure a long, arduous and unremunerative apprenticeship; they borrow heavily at the beginning to become proprietors, and lend heavily at the end to become retirees; they have to take extraordinary risks that at the end of their lives the costs associated with retirement will be recouped; they leave themselves open, when they are most vulnerable, to opportunistic or foolish behaviour. They place their fate in the hands of a party they can never be sure to trust in a transaction that has no guarantees. Yet, they chose to be bakers. In addition, their customers choose to eat baker's bread rather than its industrial counterpart.There are pressures for rationalisation and efficiency. In the extract, we saw how the industrial flour millers sought to exercise power and dispense with the preferences of French consumers not to purchase the kind of industrial bread that they could make. The transaction costs are expensive and inefficient for all concerned. The customers have to shop for bread both in the morning and again in the afternoon – with industrial bread just one weekly supermarket trip would suffice. Nevertheless, French bread ‘works’ in the sense that people make it, buy it, eat it and enjoy it.The lesson we learn is simple: these bakers act rationally, as do their industrial counterparts equipped with methods of rational management-seeking economies of scale – even though they each act radically differently. Thus, do not expect a singular scientific rationality to be played out in organisations; rather, rationalities exist in plural, each based and legitimised in its own logic. No rationality is necessarily ‘more rational’ than another. Rather than focus on bread per se, it is also possible to consider bread as part of a wider social process that is embedded in the institutionalised rules of practice.French bread making is a testament to what Granovetter (2002, p. 363) has termed the ‘embeddedness’ of economic action: ‘The argument that the behaviour and institutions to be analysed are so constrained by ongoing social relations that to construe them as independent is a grievous misunderstanding.’ Granovetter attempts to correct this misunderstanding by focusing on the central role of networks of social relations in producing trust in economic life. Seen from this perspective, the reproduction of the boulangerie is not only a mode of organisation but also a complex of cultural and economic practices. It is a classic case of embeddedness. One consequence of an embedded analysis is a perceptible transformation in the object studied. It enables one to appreciate that ‘small firms in a market setting may persist … because a dense network of social relations is overlaid on the business relations connecting such firms’ (Granovetter, 2002, p. 385).Granovetter's emphasis on embeddedness is quite at odds with the conventional perspective on a singular rationality of market efficiency. Such theories operate with an ‘under-socialised’ conception of action in their models and analysis, one modelled on the abstractions of economic rationality. The people who inhabit the theories of singular economic rationality are truly one-dimensional characters: they can calculate but not do much else. In Oscar Wilde's phrase, they know the price of everything and the value of nothing. (‘What is a cynic? A man who knows the price of everything and the value of nothing.’ Oscar Wilde, Lady Windermere's Fan (1892), Act 3.) They have been reduced to a calculus, while every other aspect of their social being has been stripped away. The reductionism of an under-socialised view of economic action has been dealt an effective counter-factual blow by the case of French bread, with its insistence on the institutionalisation of value and the centrality of culturally framed economic mechanisms in ensuring the survival of a seemingly archaic form into contemporary times.6 ConclusionWe have covered a lot of ground in this course – yet, at one level, the message is simple: knowledge involves knowers – people – who learn how to think and act in the here-and-now of specific contexts. Practice situated in specific contexts is rarely if ever idiosyncratic, utterly individualistic or random. Rather, it is shaped by past practice. Informal and explicit formal rules – the institutional ‘rules of the game’ (North, 1990) – enable and constrain particular activities.Many aspects of practice embody a taken-for-granted quality that we only notice when people do something that offends against accepted norms (for example, when somebody outrages public opinion as a result of unacceptable views or actions). Hence, the rules that maintain order and reduce uncertainty in everyday practices are not necessarily obvious (even to the practitioners themselves) and they are often neglected in accounts of how to manage and change things. Although this might be acceptable in cases where everybody has a viable understanding of the context in question, people who suddenly encounter contexts where the rules of practice are different could find it difficult to make sense of what is happening (for example, the American who is suddenly transferred to Japan might struggle to make sense of apparently simple things). Shifting across cultural contexts makes us all practical ethnomethodologists (people who seek to understand the folk methods in use in different settings) as we try to understand the rules that we might transgress so easily.Whereas North (1990, p. 46) saw progress from less to more complex societies as a unidirectional march (albeit lengthy and uneven), from unwritten traditions and customs to written laws that facilitate increased specialisation and the division of labour, the power mediated by tacit knowing can act as an unseen barrier to convergence. For example, in Japan and China, mutually binding understandings within close-knit relationships can be more important than explicit rules. Yet, emotional persuasion of the type that operates in Japan's workplace ba or China's guanxi relationships tends not to be a dominant element in the stories that English language textbooks present to explain how to achieve a difference: the practice of power. Instead, there is often a tendency to privilege rational accounts of what ought to happen and logical explanations of why such and such has happened. Leaders are expected to articulate explicit policies, rise to the occasion, act quickly, take charge and, if necessary, be held to account for their actions. However, the growing interest in communities of practice helps to highlight the disparity between formal accounts of what ought to happen and what actually happens in practice.Although accounts of management and business practice might speak, perhaps disparagingly, of the old school tie, or the old boys club, these informal accounts of how power is used are often taken as a violation of ‘rational’ norms – despite their widespread prevalence. Thus, the ideal of best practice in an efficient organisation is often presented in terms of rational rules in a bureaucratic hierarchy. While Taylor's scientific management has provided a convenient vehicle-of-opportunity for those who wish to critique capitalist modes of production, the principle of abstracting relevant information from a specific context and making that information available to the right people, bears a strong family resemblance to many contemporary accounts of knowledge management. However, rational argument can be a very weak form of power: many eminently rational and logical plans are rejected for seemingly irrational reasons.The belief that everything can be reduced to single, rational explanation denies the possibility of learning from different viewpoints and rationalities – as our study of French bread-making processes demonstrated. Ignoring the informal communication processes that mediate the practice of power can lead to an ostensibly rational account, but denying the influence of other perspectives can be a significant barrier to sensemaking. This is especially important in cultures such as Japan and China, where highly nuanced gestures and signs – including the significance of what is not said – might not be commensurate with UK, US or other Western expectations about rationality.In Japan, the key to a successful career is to enter a high-ranking university – ideally, the University of Tokyo. Graduation is virtually assured to those who pass the challenging entrance exams, and Japan's most prestigious employers will recruit their permanent employees from the highest ranked universities. Cohorts join these elite organisations together and progress though their careers together. Thus, not surprisingly, Japan's company-as-family workplace ba typically take the idea that ‘the organisation is the people’ very seriously and encourage their people to both work and socialise together – thereby generating highly aligned tacit knowing that helps the collective to act in a coordinated way. However, the participation of company members in after-hours activities is not so much a reflection of the formal power of organisation, but of a wider disciplinary authority mediated by Japan's institutional rules of practice: embedded social expectations reflect the idea that obligations to colleagues at work come first. Obligations to the organisation that Japanese employees take for granted might surprise those who are used to life in, for example, Anglo-Saxon cultures. Our case study of French bread also illustrated that work practices are constructed within a social context: trying to rationalise such practices according to universal standards can cause important viewpoints situated in the perspectives of the actors (rather than those of the rational analyst) to be overlooked or ignored.How would you explain your organisation to a stranger, a Robinson Crusoe figure cast up at the office door? Many people might resort to a graphical representation of an organisational structure or an official account of what people ought to be doing. A tour of the organisational facilities might reveal buildings, desks and people – but the esprit de corps that emerges from organisational practices cannot be objectified and put on display for the visitor's regard. Ultimately, making sense of knowing-in-practice depends on possessing knowledge that is meaningfully aligned with that practice. Although much has been written about universally applicable rules and fixed meanings, constructivist approaches to communication, learning and sensemaking direct attention to the importance of context.Crusoe's encounter with Friday represented the meeting of two radically different cultures: Crusoe's belief in the spirit of Calvinism was pitted face-to-face with cannibalism. At first sight, neither party's rules of practice made much sense to the other – yet, their joint engagement in daily living practices was instrumental in the generation of a shared repertoire of ‘knowledge tools’ that they remembered and held in common as a resource for enabling future practice. While Crusoe's global adventure represents a dramatic contrast in the values and expectations of their respective cultures, less exaggerated differences between different communities of practice – and their ‘imagined’ extensions as nations, religions and so on (as discussed in Section 3.1) – are intertwined with globalisation. People are simultaneously members of myriad nested and overlapping communities; as Wenger (2003) pointed out, you do not cease to be a parent when you go to work. In working through this course we have come across many examples of insiders who possess a capacity for tacit knowing that appears to be highly aligned with that possessed by their colleagues. Thus, team players who know each other well can appear as if they are ‘in each other's minds’. However, the context-specific dimension of tacit knowing is often overlooked in traditional, English language management and business textbooks.Keep on learning Study another free courseThere are more than 800 courses on OpenLearn for you to choose from on a range of subjects. Find out more about all our free courses. Take your studies furtherFind out more about studying with The Open University by visiting our online prospectus. If you are new to university study, you may be interested in our Access Courses or Certificates. What’s new from OpenLearn?
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