eBooks

Human Resources and Organizational Approaches

0404
2016
978-3-7398-0052-3
978-3-8676-4659-8
UVK Verlag 
Rebecca Popp
Wilhelm Schmeisser

The authors present the basics of four schools of thought regarding a personnel management-related standpoint with their axioms, assumptions and logic. Closest to the practical, normative business management comes the finance-oriented personnel management - one only needs to think of remuneration management, personnel controlling, the Berlin Human Capital Assessment or occupational pension schemes. Therefore, they take the example of the annual financial statement of an international enterprise and deduct and calculate the Berlin Balanced Scorecard Approach from it. Personnel management can only be successful, if the structural and process-related organization of the company permits achieving company goals. Therefore, the description of four basic organizational theories complements the deliberations on human resource management.

<?page no="2"?> R ebecca Popp Wilhelm Schmeisser <?page no="4"?> Rebecca Popp Wilhelm Schmeisser Human Resources and Organizational Approaches UVK Verlagsgesellschaft mbH Konstanz und München <?page no="5"?> Bibliografische Information der Deutschen Bibliothek Die Deutsche Bibliothek verzeichnet diese Publikation in der Deutschen Nationalbibliografie; detaillierte bibliografische Daten sind im Internet über <http: / / dnb.ddb.de> abrufbar. ISBN 978-3-86764-659-8 (Print) ISBN 978- 3-7398-0051-6 (EPUB) ISBN 978-3- 7398-0052-3 (EPDF) Das Werk einschließlich aller seiner Teile ist urheberrechtlich geschützt. Jede Verwertung außerhalb der engen Grenzen des Urheberrechtsgesetzes ist ohne Zustimmung des Verlages unzulässig und strafbar. Das gilt insbesondere für Vervielfältigungen, Übersetzungen, Mikroverfilmungen und die Einspeicherung und Verarbeitung in elektronischen Systemen. © UVK Verlagsgesellschaft mbH, Konstanz und München 2016 Einbandgestaltung: Susanne Fuellhaas, Konstanz Einbandmotiv: © Ilona Baha - Fotolia.com UVK Verlagsgesellschaft mbH Schützenstraße 24 · 78462 Konstanz Tel. 07531-9053-0 · Fax 07531-9053-98 www.uvk.de <?page no="6"?> P Pr reeffaaccee The explanation and conception of operational processes within a successful industrial firm is the core element of general, international business economics from a viewpoint of decentralized actions of a company and of several decision makers. Personnel management and organizational theories offer a good starting point to describe, understand, explain and conceive a business. 1 Until now, industrial research does not offer a fully perfected, empirically proved and well formulated managerial theory, consisting of a system of falsifiable hypotheses. Therefore, the basic schools of thought related to personnel management and business organization will be presented. The methodological background of business economics is coined by the fact that most business management related problems are poorly structured and complex. For that reason they can only be addressed as multi-complex problems, e.g. from a personnel-management related and organizational viewpoint. Complex problems in connection with business economics can only be described and partially solved with the help of different definitions of part-problems from a personnel management and organizational perspective, but it is not possible to summarize them in comprehensive, univariate definition and solution. We present the basics of four schools of thought regarding a personnel management-related standpoint with their axioms, assumptions and logic. Closest to the practical, normative business management comes the finance-oriented personnel management - one only needs to think of remuneration management, personnel controlling, the Berlin Human Capital Assessment or occupational pension schemes. Therefore, we take the example of the annual financial statement of an international enterprise and deduct and calculate the Berlin Balanced Scorecard Approach from it. 1 Cf. the following German literature with regard to that topic: Schmeisser, W. / Andresen, M./ Kaiser, S. (2012) Personalmanagement, UTB basics, Munich, chapter 1 and chapter 3.1 and Schmeisser, W. / Reiss, M. / Rolf, A. / Popp, R. (2014): Organisation, UTB basics, Munich, chapter 2 <?page no="7"?> 6 Vorwort The counterpart of each personnel management related theory is the corresponding organizational theory. Therefore, the four basic schools of thought with regard to organization are presented. In this context, the structural approach is essential and the other organizational theories repeatedly refer to it. The political and legal organizational approach with its paradigm from the Corporate Governance Approach 2 is certainly worth mentioning in an international company with its conflict-filled problems. For example the practical application of the financial controlling of strategic management or of the company supervision due to different compliance standards requested by the state or the capital market and in Germany, e.g. by the employee participation, confront the company management with huge challenges. Berlin and Nuremberg Rebecca Popp and Wilhelm Schmeisser V Voorrw woorrt t Primärer Gegenstand und Objekt der allgemeinen, internationalen Betriebswirtschaftslehre ist die Erklärung und Gestaltung des betrieblichen Prozesses im Erfolgsmodell Industriebetrieb aus der Sicht des dezentralen Handelns eines Unternehmers oder mehrerer Entscheidungsträger. Personal- und Organisationstheorien bilden hier gute Ansatzpunkte einen Betrieb zu beschreiben, zu verstehen, zu erklären und zu gestalten 3 . Da es eine voll ausgereifte, empirisch abgesicherte und wohl-formulierte betriebswirtschaftliche Theorie, bestehend aus einem System von falsifizierbaren Hypothesen noch nicht in der betriebswirtschaftlichen Forschung gibt, werden hier die grund- 2 Schmeisser, W. and Popp, R. (2016): Corporate Governance, UVK-Verlag, Munich (to be released) 3 Vgl. hierzu die deutsche Literatur: Schmeisser, W. / Andresen, M./ Kaiser, S. (2012) Personalmanagement, UTB basics, München, Kapitel 1 und Kapitel 3.1 und Schmeisser, W. / Reiss, M. / Rolf, A. / Popp, R.(2014): Organisation, UTB basics, München, Kapitel 2 <?page no="8"?> Vorwort 7 legenden Denkschulen aus personalwirtschaftlicher und organisatorischer Sicht vorgestellt. Methodologischer, betriebswirtschaftlicher Hintergrund ist, dass die meisten betriebswirtschaft-lichen Probleme schlecht-strukturiert und komplex sind, und man sie nur als Multi-Komplex-Probleme, z.B. aus verschiedener personalwirtschaftlicher und organisatorischer Sicht, lösen helfen kann. Komplexe, betriebswirtschaftliche Probleme kann man deshalb nur durch verschiedene Teil-Problem-Definitionen unterschiedlicher personalwirtschaftlicher und organisatorischer Sicht beschreiben und teilweise lösen, ohne sie zu einer umfassenden, univarianten Problem-Definition und Lösung zusammenfassen zu können. Hier werden vier Denkschulen aus personalwirtschaftlicher Sicht grundsätzlich vorgestellt, mit ihren Axiomen, Prämissen und ihrer Denklogik. Der praktischen, normativen Betriebswirtschaft liegt natürlich die finanzwirtschaftlich orientierte Personalwirtschaft am nächsten, denkt man nur an das Entgeltmanagement, das Personalcontrolling, an die Berliner Humankapitalbewertung oder die betriebliche Altersversorgung. Deshalb wird hier exemplarisch der Berliner Balanced Scorecard Ansatz aus dem Jahresabschluss eines internationalen Unternehmens abgeleitet und berechnet. Das Pendant jeder personalwirtschaftlichen Theorie bildet die entsprechende Organisationstheorie. Es werden deshalb die vier grundsätzlichen Denkschulen zur Organisation vorgestellt, wobei der strukturelle Ansatz unumgänglich ist, und auf den die anderen Organisationstheorien sich immer wieder beziehen. Zu erwähnen ist sicherlich der politisch-rechtliche Organisationsansatz mit seinem Paradigma des Corporate Governance-Ansatzes 4 in einem internationalen Unternehmen mit seinen konfliktreichen Problemen. So erweisen sich die praktischen Umsetzungen des Controllings des Strategischen Managements, der Unternehmensüberwachung wegen unterschiedlicher Compliance-Anforderungen durch den Staat oder den Kapitalmarkt und in Deutschland z.B. durch die Mitbestimmung als ausgesprochene Herausforderungen an die Unternehmensführung. Berlin und Nürnberg Rebecca Popp und Wilhelm Schmeisser 4 Schmeisser, W. und Popp, R. (2016): Corporate Governance, UVK-Verlag, München (erscheint noch) <?page no="10"?> TTaabbllee ooff CCoonntteenntt Preface ...................................................................................................... 5 Vorwort .................................................................................................... 6 1 Theories on personnel management - from productivity to value and knowledge-based human capital ....................13 1.1 Scientific management as predecessor of a functionoriented personnel management ................................................ 13 1.2 Scientific management as practical trigger of “functionoriented personnel management” .............................................. 14 1.3 Finance-oriented personnel management as further concept... 20 1.3.1 Capital market-oriented approach ................................ 23 1.3.2 Goals of personnel cost planning ................................. 25 1.3.3 Criteria of personnel cost planning .............................. 26 1.3.4 Continued remuneration in case of sickness ............... 27 1.4 Personnel management based on behavioural-science and labour psychology ........................................................................ 27 1.5 Labour economics: a macroeconomic concept........................ 32 2 Calculation of selected personnel management instruments and numbers of the annual financial statement for the Berlin Balanced Scorecard Approach .......................41 2.1 Connection of the accounting systems in the annual financial statement ................................................................................ 41 2.2 Personnel controlling and the Berlin Balanced Scorecard Approach ....................................................................................... 42 2.2.1 Personnel controlling as internal information supply... 43 2.2.2 Personnel controlling as coordinator of the personnel management system.................................................. 44 2.3 Balanced Scorecard - A personnel Performance Management Approach............................................................................. 45 <?page no="11"?> 10 Table of Content 2.3.1 Traditional performance measurement systems of personnel controlling ....................................................... 45 2.3.2 Return-on-Investment - a personnel performance approach ............................................................................ 46 2.3.3 Balanced Scorecard as instrument for strategy implementation ................................................................. 48 2.3.4 Balanced Scorecard terminology .................................... 49 2.3.5 Goal and scope of action of the balanced scorecard... 49 2.3.6 Balanced Scorecard Structure ......................................... 51 2.3.7 Controlling perspectives of the Balanced Scorecard ... 51 3 Berlin Balanced Scorecard Approach....................................59 3.1 Conception .................................................................................... 59 3.2 Application of the Berlin Balanced Scorecard Approach....... 60 3.2.1 Data basis (cf. Annual financial statement 2010 BASF) ................................................................................. 60 3.2.2 On connecting the financial and customer perspective....................................................................................... 61 3.2.3 Customer perspective: A marketing perspective .......... 66 3.2.4 Connection between the customer-/ market and the financial perspective ......................................................... 69 3.2.5 On the connection of the internal process perspective and the employee potential or human capital perspective with the financial perspective ..................... 70 4 Basic considerations on organizational concepts...............83 4.1 Toyota’s Just-in-Time: an organizational success story .......... 83 4.2 Organizational Targets: no performance measurement without targets .............................................................................. 89 4.3 On the necessity of organizational concepts ............................ 91 4.4 Organizational concepts and assumptions............................. 94 <?page no="12"?> Table of Content 11 4.4.1 On the structural approach: metaphor - organization as “machine”....................................................... 95 4.4.2 Behavioural science and labour organization based organization concept ........................................... 96 4.4.3 Legal-political organizational approach: companies as governance instrument and political arena for interest groups................................................................. 99 4.4.4 On the visionary, symbolic cultural organizational approach......................................................................... 103 4.4.5 Corporate organizational theory as approach for the recognition, analysis and design regarding organizational problems............................................... 105 4.5 On Kosiol’s traditional organizational theory ........................ 107 4.6 Organizational analysis .............................................................. 114 Literature ......................................................................................... 121 Index................................................................................................. 127 <?page no="14"?> 11 TThheeoorriieess oonn ppeerrssoonnnneell mmaannaaggeemmeenntt -- ffrroomm p prroodduuccttiivviittyy ttoo vvaalluuee a anndd kknnoowwlleeddggee--bbaasseedd hhuummaann ccaappiittaall 11..11 SScciieennttiiffiicc mma annaaggeemme enntt aass pprreeddeecceessssoorr ooff aa ffuunnccttiioonn--oorriieenntteedd ppeerrssoonnnneell mma annaaggee-mme enntt Academics oriented towards national economics, in this case national labour economists, often evade problems of “general management” and therefore also of some functions of human resources, especially of personnel management and organization. They project the economic assumptions of a perfect market model onto a kind of labour market within a company and take over all assumptions of an atomic market model. They consider business studies as field of microeconomics and national labour economics. Therefore, business studies should resort to the way of thinking, to the methods and patterns of argumentation of national economics. With his book “Production” (1951) Gutenberg made a cut between national economics and business studies with the production functions A and B. He makes clear that the production function A of national economics is not suitable for business studies, as it is neither practically nor theoretically comprehensible and that company management, including personnel management, cannot be defined away with the help of “market models”. Besides, models of national economics have been questioned for more than 200 years on a theoretical, legal-normative and empirical basis. This criticism is due to the development of industrial enterprises and especially to the phenomenon of “management” which questions the separation of ownership and leadership of microeconomic models and the dispositive production factor management, which coins Gutenberg’s production function. In a model it is thinkable that one person owns and leads the company and works for the company and controls it and is led by the market at the same time, however, this reduces personnel management in an <?page no="15"?> 14 1 Theories on personnel management industrial company to absurdity. Additionally, personnel management works in accordance with formal conduct guidelines dictated by the company goals of productivity, cost effectiveness and profitability and does not intend to solve the allocation problem on the national labour market. In this case the national labour economics as alleged business management function lacks credibility. The performance measurement as predecessor of human capital assessment in the company is always achieved with a combination of technical, social and economic processes as well as an organizational approach concerning the process-oriented organization. 11..22 SScciie en nttiif fiic c mmaannaaggeem meen ntt a ass p prraaccttiic caall ttrriig gggeer r ooff ““ffuun nccttiio onn--oorriie en ntteed d p peer rssoonnnneel l m maannaaggee- mmeen ntt”” The first ideas on (industrial) business management refer in a narrower sense to questions on labour organization and to the explanation as to why in industrial businesses high productivity figures can be achieved and why enormous efficiency problems can be solved. Pre-classical thinkers like Adam Smith explain high productivity rates in industrial businesses with the help of the example of pin production. High division of labour in industrial businesses as well as the invention of machines are analytically deduced as explanation for the enormous growth of productivity rates achieved by employees. Around 80 years later Babbage perceived that with high and increased productivity rates staff costs can be reduced and high efficiency rates can be achieved. In addition to that, due to the freedom of trade in the free market economy in England, and due to the mass production in miscellaneous industrial companies, unskilled, low-salary day labourers or also children and women could be employed for a pittance. Today, this phenomenon of remuneration can be found between industrial countries and developing countries in transnational and multinational businesses, as those companies purposefully choose production in developing countries due to low staff costs. <?page no="16"?> 1.2 Scientific management as a practical trigger 15 The most sustainable and for more than 100 years most famous, global, industrial model of business management and staff management was practically, theoretically and empirically developed and put into practice by Frederick W. Taylor and Henry Ford I. Example: The Ford Motor Company produced the car model T as first car in mass production for the anonymous mass on the assembly line. 16 million cars of model T were offered for a price of 800 USD. At that time the “normal price” of a handcrafted car was 5000 USD. Everybody could obtain an “individual” car, as long as the car could be black and the model T. There was no other mass car than the Ford Model-T. This mass production in the mass market “automobile sector” was and is up to now only possible due to the management theory of “scientific management” developed by Taylor (also called Taylorism or Fordism). To explain to some extent with today’s concepts of strategic management this prime example of a success story in the automobile sector, one needs to attempt a consistent, up-to-date interpretation with Porters strategic concept of cost leadership. Taylor was certainly familiar with every classical thinker of natural science like Newton, as well as national economists like Adam Smith and Ricardo, as well as Darwin’s theories of behavioural science and evolution. He was convinced that the methodological knowledge from natural science and mechanics would also offer an instrumental, organizational and personnel management basis for business management. He propagated a radical division of labour with almost zero qualification of the employees, i.e. in today’s argumentation almost zero human capital, in order to achieve the highest productivity on the assembly line with the help of extreme labour division and for being able to discharge unnecessary employees in order to reduce staff costs. The remaining employees were offered a performance-oriented remuneration (piece work system), in order to motivate the employees in the sense of the picture of mankind as “homo oeconomicus”. This way an increase of productivity by 300% to 400% was achieved. Taylor’s concept of staff management is put into practice with the help of a consequent staff selection, work places designed in accordance with scientific conclusions with breaks and recovery <?page no="17"?> 16 1 Theories on personnel management phases, training phases, a consequent process-oriented design of logistics in accordance with the organizational principle of continuity, as well as the entire production management, especially the strict separation of management functions from performing activities under functional management (the later matrix organization). Through analytical time and motion studies in the system of scientific business management staff costs and productivity were easier to calculate. With the help of the attribution of contributions to individual employees or to at least larger groups of employees concerning the production process of one or several products, as conceived in today’s human capital assessment, cost accounting and bid proposal calculation for potential customers were made possible. Taylor and Ford enforced those “inhuman” production conditions by doubling the wages. Only this way the employees were prepared to tolerate the “inhuman” conditions at the assembly line. However, in his memoirs Ford prided himself as social entrepreneur for doubling the wages per day, allegedly on a voluntary basis. Example: Ford had omitted that due to the extreme labour division at the assembly line his employees suffered from monotony and psychological saturation. E.g. they only fixed one screw on every car every single second during 10 hour-days and had to act like industrial robots, not being able to change the working conditions. The high fluctuation rate, which is said to have achieved levels of 800% or 900%, demanded for a wage increase by 100%, in order to at least maintain the production at the assembly line. Only since the Hawthorne surveys (1927-1932) personnel management concepts based on behavioural sciences and labour psychology try to explore the negative sides of Taylor’s and Ford’s industrial success story in order to avoid negative consequences. The production of Ford’s model T became a worldwide success story. Despite all negative points from a personnel management point of view, Taylor developed personnel management functions as staff selection, use of personnel and staff training and even doubling the wages and/ or staff costs did not harm Ford’s success, as the increase in productivity compensated the rise in staff costs. <?page no="18"?> 1.2 Scientific management as a practical trigger 17 Info: Today we would attribute this to Porter’s strategic approach of cost leadership. Ford achieved competitive advantages by using mass production on the assembly line for his model T. With the help of Taylors theory Ford had achieved cost leadership in the automobile sector. Via cost leaderships he had completed the learning and experience curve and put the law of mass production into practice for over 16 million cars. The enormous division of work and specialisation of employees at the assembly line had caused massive productivity increases and a decrease of staff costs. These achievements were the basis for the implementation of the implicit strategy of cost leadership. Cost leadership made it possible for Ford to offer a very low price for the T model. This way it was possible to offer a mass car and to make it affordable for everyone, because cost reductions permitted to decrease sale’s prices. At this time Ford became the world’s largest car company with a market share of 54% in the US automobile sector. Example: Ford’s and Taylor’s success technique was adapted in the automobile industry worldwide up to today, as in General Motors, Toyota, Volkswagen, BMW etc. and perfected e.g. by quality management, just-in-time procurement, computerisation and business software, e.g. SAP and with the help of the internet for problems relating to logistics, research or construction. The success story of scientific management was copied worldwide for several sectors and adapted as in the case of UPS as mail delivery service, the furniture store IKEA, the discounter Aldi or the fast food chain McDonalds. Interim Conclusion for the concepts of functional personnel management and finance-oriented personnel management: The classical approach for both concepts above is scientific management, which with the application of continuous production with the technical concept of the assembly line, the planned supply of material at the places of assembly at the conveyer belt, the “normal working time” and the piece work wage managed to develop an analytical, planned cost calculation. The Taylorism is fur- <?page no="19"?> 18 1 Theories on personnel management ther refined in research on organizations by Nordsieck and Kosiol relating to operational and organizational structures. Every organizational concept is put under the criteria of technical purposefulness, productivity and economic efficiency. In the 80s the Toyota system and the Lean Management consequently build on the findings of the operational organization by Taylor and Kosiol, using terms as justin-time, Kanban-system, Quality-circle etc. The business process organization or business reengineering is the next organizational step in order to redesign the operational process with the help of commercial information technology, IT programming and webbased control. Time, costs and quality are now optimized within the context of process organization and business processes, in order to discover and realize potential productivity gains. Human work is partially disengaged from processes and integrated as fill-gap. This way also productivity in value adding processes within the interaction of organization, technology and human work is increased. However, it has not been clarified how much human labour is worth, how much it contributes to creativity in productivity and creation of value. Especially in the service sector this question waits for a scientific clarification by human capital models. First economic attempts on productivity of processes in health management are undertaken with the help of quality management and activity-based costing. In the last 10 to 15 years concepts of human capital assessment have broached the issue of productivity and value driving function of human labour in business. Sustainable and transparent productivity key figures as well as measurement methods for industrial businesses are searched for, but also for organizations in the service sector. This is an aim of the finance-oriented personnel management with the Berlin Human Capital Assessment Model. <?page no="20"?> 1.2 Scientific management as a practical trigger 19 Info: The function-oriented personnel management approach is based on the assumption that the factor personnel has to be focused in the sense of a general management approach. The process-based management concept, which foresees the instrumental configuration of the use of human capital, is underlined in this concept. Goals like personnel strategy, personnel planning, personnel requirements planning, personnel recruitment planning, staff reduction planning, labour utilization planning, personnel training, labour cost planning and personnel controlling are personnel management functions. But also the operational, tactical and strategic personnel management perspective per function and mix of instruments have been a permanent reason for discussions for decades, for example relating to demographic change and diversity management. In the last 40 years personnel development was especially spotlighted. Since the Hawthorne studies personnel management based on labour and labour psychology has influenced the function-oriented personnel management, in order to achieve a better integration of the employee into the company. With a pragmatic personnel development employees are meant to be motivated to accept work and the company. On the other hand, organization and personnel are adapted to changed social and economic conditions based on aspects of economic efficiency and profitableness. For decades employees have been enjoying a longer and better general school and tertiary education. Therefore, they are not willing to work in a company with a Tayloristic system. In other words, the division of labour is abolished step by step. Since the 1960s and 1970s there have been discussions on work humanisation and with the personnel development an implicit discussion on human capital has been started. The question arises as to how personnel development arrangements for an optimal employment of staff can be planned, organized, implemented and evaluated. Which methods of further training and education and of staff deployment are appropriate to make people satisfied and to enable them to reach the desired productivity? Figure 1 reflects the philosophy of an implicit human capital model of personnel development. It unifies school educa- <?page no="21"?> 20 1 Theories on personnel management tion and company training, in order to use the employee with his competences and to develop the employee’s potential. Fig. 1: Human capital from a personnel development perspective 11..33 FFi innaannccee--oorriieenntteedd ppeerrssoonnnneell mmaannaaggeemmeenntt aass ffuurrtthheerr ccoonncceepptt The finance-oriented personnel management is a theoretical approach, which can be categorized under the traditional methods of business management. It resorts to the classical instruments and data of accountancy, i.e. of bookkeeping, annual financial statement, cost accounting, controlling, financing and investment, in order to apply them to personnel management decisions. <?page no="22"?> 1.3 Finance-oriented personnel management as a concept 21 The finance-oriented personnel management seizes the convergence idea of accountancy with regard to IFRS in the formation of business management theories and deducts its data basis directly from the annual financial statement and/ or the remuneration statement. It directly applies models and instruments of remuneration management and business appraisal in connection with the Human Capital Assessment model as well as the Berlin Balanced Scorecard (cf. Schmeisser 2008; cf. Schmeisser/ Clausen 2009; cf. Schmeisser/ Drewicke/ Buck 2011 on the practical application). The logic of finance-oriented personnel management shows that the approach conforms to the trend of internationalisation of accountancy (e.g. International Financial Reporting Standards - IFRS), because internal and external accountancy are combined. I.e. the accountancy has to satisfy two concrete needs of information: To account for economic practice, i.e. especially information on past economic practice, e.g. via personnel controlling in the company. To provide information which helps to assess the economic development of the company, especially also the efficiency of accompanying personnel management measures. With the help of selected human capital assessment models and key figures the efficiency of e.g. remuneration management systems can be evaluated. This way the finance-oriented personnel management also provides empirical evidence for a company, because there are two types of information problems in a company: [1] Information of accountancy in accordance with IFRS are already needed in the stage of recognition and formulation of (human resources-related) decision problems, e.g. for outplacement measures or the social compensation plan, decisions on old age pension, stock option plans etc. [2] Furthermore information is needed because personnel management needs to assess the consequences resulting from decision alternatives, e.g. calculation of strategy, human capital assessment and its consequences for the research and development team, cash-flow calculation, value added statements and its consequences for the pursuit of strategies. <?page no="23"?> 22 1 Theories on personnel management Fig. 2: Logic of finance-oriented personnel management Based on Schmeisser/ Clausen 2009, p. 161. Many functions of personnel management can be calculated with quantitative techniques from financing and controlling and can be presented in a way to support decision-making. Numerous qualita- <?page no="24"?> 1.3 Finance-oriented personnel management as a concept 23 tive and instinctive arguments from personnel work can be substantiated with figures and decisions relating to personnel management are easier to justify. Often the question arises as to how much the staff of a company can contribute to the human capital performance in value added accounting. Figure 2 presents the logic of finance-oriented personnel management in the context of the Berlin Balanced Scorecard Approach and of a general performance measurement approach in the context of accountancy. 11..33..11 CCa ap piittaal l m maar rkkeet t--oorriieen ntte ed d aap ppprrooaac chh The assessment of human capital or of the value of human capital in accordance with a capital market-oriented approach is based on the following considerations: It considers the value of human capital as present value of future profits. The Economic Value Added, for example, can also be referred to as excess profit on marketdriven yields. With the IRR (Internal Rate of Return) a theoretical, middle-term, i.e. in the case of irregular, unstable returns, a yearly profit, the return of investment, can be calculated (table 1). Stock exchange value Share price × number of shares ./ . replacement costs for tangible assets Factories, machines, stock on hand, liquid funds ./ . replacement costs for other intangible assets Patents, licences, brands, other rights etc. = value of human capital of a company Tab. 1: Schema of capital market-oriented human capital assessment/ human resource evaluation Info: the capital market-oriented approach bases the assessment on the stock exchange price of the company. For this reason it is only appropriate for listed companies. It has to be noted that not the book value of the assets to be subtracted has to be taken into account, but the replacement costs, or in theory even better, their future market value. <?page no="25"?> 24 1 Theories on personnel management Listed companies with a varied array of products rather rarely use this approach as they have to estimate the exact pricing of turnover and profits of every single product and business field. Furthermore, the calculated value is subject to the volatility of the stock market prices and is therefore insecure. Furthermore, the assessment of the replacement costs of single assets of the company or of their future, value-oriented market values alone can be challenging. The Berlin-Balanced-Scorecard-Approach (BBSC) is one of the central methodical instruments of finance-oriented human resource management: Fig. 3: Berlin Balanced Scorecard and Berlin Human Capital Assessment Model as Controlling Instrument The Berlin Balanced Scorecard Approach calculates with accounting data, cardinally or mathematically, each of the four Balanced Scorecard perspectives. The approach connects the four perspectives with selected instruments of accounting, as for example the break-even analysis, contribution margin accounting or value added accounting. With the help of the shareholder-value and selected <?page no="26"?> 1.3 Finance-oriented personnel management as a concept 25 company assessment models the Berlin Balanced Scorecard can be made more dynamic in the course of time or years. If a company is striving for a certain turnover with a desired ROI, the HR management can for example use the employee contribution margin to develop a fair remuneration management, to plan stock option programs, deduce employment scheduling or to connect staff recruitment and human capital assessment. Training measures and the corresponding software can make the HR-process-management more efficient and facilitate calculations. 11..3 3..2 2 GGooaallss ooff ppeerrssoonnn ne el l ccoosst t ppllaannnni inng g The personnel costs also comprise ancillary personnel costs. These costs arise in addition to the pure remuneration and on the one hand comply with legal and collectively agreed specifications. On the other hand they also comprise voluntary benefits. Legal and collectively agreed ancillary personnel costs could be the payment of absence periods, additional vacation payment or payments for capital formation, as well as collectively agreed additional payments, e.g. a 13 th salary. Company ancillary costs comprise costs for further education and training, consultation services, company old age pensions, staff canteens or also costs for company child care. Therefore, the personnel costs are defined as sum of the remuneration for the work performed and the ancillary personnel costs. From a finance-oriented point of view, these costs are also referred to as direct personnel costs. Indirect personnel costs are additional expenses for the fulfilment of the HR-related functions as well as the budget for staff and material in the HR department. Definition: Personnel costs are costs which arise due to the use of human workforce within a company. A good, comprehensive and foresighted planning in the company is necessary to administer and steer the personnel costs. One cost planning instrument for this purpose is personnel cost planning. The cost side of all HR measures is part of the consideration of personnel cost planning. The development of HR costs within one period is considered and evaluated. <?page no="27"?> 26 1 Theories on personnel management The main drivers of personnel costs are filtered out and the direction of their development is presented. On short notice the development of personnel costs goes contrary to the earning power of the company. It has to be found out whether the company is capable to bear the personnel costs and which possibilities it has to influence personnel costs, in order to achieve higher human capital values later on. The cost-related impacts of all personnel management measures are in the focus of personnel controlling. They are analysed and serve as basis for the further development and design of personnel policy in the company. 11..33..33 CCr riitteer riiaa ooff ppeer rssoonnnneel l ccoosstt ppllaan nnniinngg For personnel cost planning the accuracy of original data is a key factor of success. Only detailed and precise data can give a real overview and make meaningful planning possible. For this purpose, the desired goal should always be kept in mind, to avoid that the calculations become an end in themselves. An exact and up-to-date personnel cost planning provides the foundation for management decisions in connection with other goals and budgets. It can contribute to the minimization of risks for the company. Personnel cost planning consists of different activities in continuous order: planning, plan controlling and plan correction. The planning comprises the presentation of the problem. It is determined which areas have to be especially concentrated on and under which focus they have to be examined. Once the problems are detected, information is collected in a next step. From the gathering and analysis of information material different decision alternatives are gained and then assessed. Afterwards the favourite solution is selected. In parallel, plan controlling and correction shall continuously take place, which demands for a continuous targetperformance comparison. It has to be performed periodically, but at the same time situation-specifically. In case of deviations they have to be analysed and the information has to be forwarded to the planning level. This connection is meaningful, because it can influence the selection of decision alternatives in the planning procedure. The original data has to be continuously examined and the changes detected have to be forwarded to the planning level. <?page no="28"?> 1.4 Finance-oriented personnel management as a concept 27 Info: Planning, plan controlling and plan correction compose a circle and in addition occur in parallel. Such a personnel cost planning is optimal for any company, because it provides an upto-date overview over the foundation, targets and the statusquo. Besides, ongoing controlling and correction make the company flexible and make quick adaptions possible. Thus, it provides up-to-date and flexible information as foundation for management decisions. 11..33..44 CCo onnttiinnuueed d rreem muunneer raat tiioonn iinn ccaas see o off ssiicckknneessss The following example shows how costs for continued remuneration in case of sickness can be calculated: Example: 480 workers work in a company and earn an average wage of 16.50 EUR per hour and have a sickness time of 5 percent of their working time. Moreover, there are 160 employees earning a salary of 3350 EUR per month and having a sickness time of 3.5 percent on the average. These data can be taken from any well-kept payroll accounting. For both groups it is calculated separately how much the sick payment costs on average per month. Both sums are added and related to the monthly total sum of remuneration paid. This allows calculating the percentage of average monthly sick payments in the total remuneration paid. 11..44 PPeer rssoonnnneel l mmaannaaggeem meen ntt b baasseed d o onn b beeh haavvi i- oouur raall--sscciie en nccee aanndd l la abboouur r p pssyycchhoollo oggyy Info: Most approaches with regard to labour organization, behavioural science and management can be based on the Hawthorne experiments (1927-1932) by Mayo, Roethlisberger and Dickson as well as Barnard’s stimulus-contribution theory (1938). Both concepts are complementary to the scientific management approach, i.e. to the personnel management aspects and problems which had not been solved by Taylor. However, some authors consider the concept as opposed to the scientific management approach. <?page no="29"?> 28 1 Theories on personnel management Taylor knew about the phenomena of resistance of employees in case of extreme labour division. The inhuman circumstances to work like an industrial robot on the conveyer belt, was only bought with wage increases from the employees. However, they still suffered from monotony and psychological saturation. He surely knew group phenomena as staff strikes; however, they did not match his theoretical approach. Only by ignoring these socio-psychological phenomena he could achieve high division of labour in the organization in order to achieve the highest productivity. He and Ford overlooked that behavioural science-related phenomena were not eliminated by short term “wage increases and other material incentives” on the long run. Employees wanted to work in order to earn money, but they wanted to be treated like humans not like industrial robots. The organizational behaviour and labour psychology-related and behavioural-science-based approaches of personnel management examine how individual behaviour, group behaviour, management behaviour and organizational structure influence individual behaviour and communication etc. The foundation of behavioural science-based and labour-psychology-based personnel management is the question on how productivity of an organization or company can be maintained and increased with the knowledge gained. In effect, scientific management and the Hawthorne studies complement each other from the start. This means there is no either-or problem but rather an as-well-as problem in the application of these approaches. E.g. the negative consequences of the monotony and of strikes are tried to be avoided with the help of behavioural sciences in order to maintain productivity and efficiency of the company. Info: With the behavioural science-based personnel management concept an empirical action research program has been developed since the Hawthorne experiments, which provides an empirical instrument for personnel and organizational research via employee interviews etc. With the help of employee interviews it is attempted to make a representative and complete record of employee opinions for psychological phenomena in the company. It is therefore not surpris- <?page no="30"?> 1.4 Personnel management 29 ing that the interview asks about happiness, job satisfaction, motivation, work places, work in the department, leadership, absence times, fluctuation, burnout, mobbing, conflict phenomena in groups and examines coaching, fear, power abuse by leadership, nuisance etc. in order to obtain relations with productivity or starting points for change management within the company. The goal of the behaviour-related personnel management approach is to get a better understanding of the behaviour and actions of people by means of different socio-scientific, anthropologic, ethnographic and behaviour-science studies. By means of analysis of labour psychology and labour sociopsychological examination certain options of job organization (job enrichment, part-autonomous work groups) can be developed. The personnel management based on behavioural science assumes that technocratic organization structures and organization processes can trigger behaviour with employees which can endanger or foster productivity in companies. The task of personnel management based on labour psychology and behavioural science is to foresee how structures, processes, values, company culture or the working climate influence productivity positively or negatively. In accordance with Simon (1960), Schanz (1977) or Clermont/ Schmeisser et al. (2001, p. 13) the labour psychology and behavioural science related personnel management approach is based on the following assumptions: [1] The approach departs from the “methodological individualism”, i.e. its smallest “unit” under examination is the individual. Later on there are also groups as aggregation of individuals, without knowing the socio-psychological interdependences, as well as the organization of the company. [2] Organizations exist in order to satisfy human needs. Happiness and motivation are crucial. [3] Organizations and employees need each other in order to jointly overcome and solve company tasks e.g. in production. [4] If the cooperation between individuals and organizations is troubled because of discouragement, burnout, dissatisfaction, bad leadership, one or the other suffers from this. The compa- <?page no="31"?> 30 1 Theories on personnel management ny will have lower productivity, higher fluctuation, sickness rates of staff etc. [5] If organization/ company and individuals are well adapted, e.g. through a creative company culture and a trustworthy company management, this offers advantages for both, e.g. by means of high productivity rates. [6] Conflicts are not considered as normal, but as interferences which disrupt and trouble the work performance in the company. Therefore conflicts have to be disclosed, discussed and constructively overcome, e.g. via coaching and mediation. Info: Employee surveys are supposed to inform on the wellbeing of the employees, i.e. whether employees in the company are motivated or not, what they think about their work place, the work climate, what they think about leadership and what they think about the group or department organization and communication structure of the company and how they assess activities for personnel and organization development etc. The problem of how those aspects individual, group, leadership etc. influence each other is scientifically unsolved. For this reason, there is often a lack of specific labour-psychological recommendations after an employee survey. Within examinations under behavioural science personal management instruments, techniques, figures etc. and their findings or contributions to the maintenance of performance in the annual statement are not surveyed. The construct “motivation” for example poses a problem, because up to now there is no statistically sound motivational theory, which could be described from a statistical point of view and empirically employed by the company. Moreover, it is impossible to assign any costs or contributions to certain departments with different motivational levels in order to deduct distinct personnel management relevant and organizational conclusions. Employee surveys which are not based on theories are carried out in a psychologically pragmatic way. This is also true for their interpretation and the assumptions for organizational design. <?page no="32"?> 1.4 Personnel management 31 Fig. 4: Logic of behavioural personnel management Example: the employee survey based on behavioural science is carried out at least every two years in larger companies. However, it is questioned because of its complexity, the uncertain objectivity, reliability, validity and its costs and lack of earnings and revenue streams. For such business management examinations on a large scale the behavioural science-based personnel management does not provide methodical answers, with the result that this theoretical perspective <?page no="33"?> 32 1 Theories on personnel management can be neglected for empirical researches for a large sample of companies. Despite all methodical criticism of the research status of labour and organization psychology, its results are often employed in behavioural-science based personnel management. 11..55 LLaabboouur r eec coonnoommiiccss: : a a m maaccrrooeec coonnoommi ic c ccoonn-cceep ptt Labour economics-based considerations on human capital can be found in the macro-economic growth theory, which analyses the decisive factors of economic growth. In accordance with Siebert (2003, p. 353) the aggregate output of a national economy, i.e. the gross domestic product depends on the capital in kind employed, labour, especially qualified labour, human capital, technical knowledge, environmental system, land and the social system. In the context of microeconomic considerations on labour markets, Siebert comes to the following conclusions for unemployed people: Also from a different point of view unemployed people have a disadvantage in comparison to the employed. The human capital of those who are employed is improved by “training-on-the-job” and they gain company-specific human capital. Moreover, they are informed on the opportunities of advancement in the company and the company is informed on their qualifications. Via these advantages and the relative protection the employed have an artificial security. If unemployed would ask for the same salary, they had only few opportunities to find a job (cf. Siebert 2003, p. 158f.). Definition: Sadowski as originator of labour economics in Germany sees personnel policy as labour economics + labour market policy (Sadowski 2002, p. 90). The core of labour economics is the analysis of bilateral barter agreements. It deals with problems of barter of work performance against income or other benefits considered as advantageous like education, career opportunities or employment security.” (cf. Sadowski 2002, p. 90). <?page no="34"?> 1.5 Labour economics: a macroeconomic concept 33 Info: According to Sadowski the Nobel Prize winner Gary S. Becker (1964) has developed the actual foundations of labour economics, because he considered personnel as “asset invested” or “human capital”. The human capital of employees is responsible for the productivity of companies and is mainly based on the amount of knowledge, capacities and competences of the staff. In first place Sadowski starts from the microeconomically necessary condition for a profit maximizing labour demand in case of homogenous work. If all employees have the same productivity and prize, in each period as much personnel will be employed until the remuneration equals the marginal revenue product. If investments in education are made, which for reasons of simplicity shall be due at the beginning of the planning horizon, on the revenue side the marginal revenue product of the employment period MP 0 has to be distinguished from the marginal revenue product after the education MP 1 . The revenues discounted with the interest rate i have to be compared with the wages in the training period w 0 and the direct expenses for training b as well as the discounted wages w 1 to be paid after the education in the subsequent period. As long as the value of capital of those investment and employment decisions is positive, personnel should be employed even considering training costs (Sadowski 2002, p. 54). The logic of the approach of labour economics is presented in the following figure. For Sadowski the background to this theory is that personnel costs do not only consist of variable wage costs in the production process, but also of the search costs for the employment of personnel, costs for on-jobtraining and education as quasi-fixed labour costs. The education costs change the productivity of employees, which has to be taken into account with a change in the marginal revenue product. <?page no="35"?> 34 1 Theories on personnel management Fig. 5: Logic of behavioural personnel management It has to be criticised that labour economists only formally explain productivity, wages and human capital for business management. Because of its microeconomic model Platonism it is not interested in translating the theory in concrete, calculable data of a company on quantifiable increases of productivity, wage costs, revenue figures or human capital values. There is no empirical verification in <?page no="36"?> 1.5 Labour economics: a macroeconomic concept 35 the sense of critical rationalism, because the internal market also in a company has its own efficiency and allocation logic from a rational-definitional starting point. Definition: there is a differentiation between general human capital and company-specific human capital, which both influence the wages and the marginal revenue product. Any measures which can increase the productivity of employees in any company, are referred to as general human capital investments. Any qualification in the company which only here increases labour productivity via information on production processes, organizational routines and customer knowledge is called company-specific human capital. It is shown that as consequence employees are interested to stay with the company because of their company-related human capital and the company is interested in keeping the employees due to that human capital. How the homogeneity of human capital can be theoretically solved is not discussed. It can only be assumed what human capital in the sense of function-oriented personnel management could mean, with the “contents” of personnel development and organizational development being obvious. Because the personnel and organizational development is only partially recorded, measured and represented as personnel costs and because there is no academic record of revenues, human capital can only be reconstructed. Therefore it is astonishing that the labour economic approach massively criticises the behavioural science and labour psychologybased personnel management approach, because it cannot show how to provide a database for costs and revenues for the objects of interest in a methodical and instrumental way. The approach is only containing traces of economics and business management terms as costs, revenues, income and expenses are nearly never found in empirical researches and theories. It is not possible to refute this statement, however in this theory there is at least the attempt to secure productivity via labour satisfaction, motivation and/ or happiness with the job. <?page no="37"?> 36 1 Theories on personnel management The goal of labour economics is to subject personnel policy decisions to an economic calculation, while accounting for the labour market conditions and the resulting microeconomic, institutional conditions. Thus, conceptual thoughts of politico-economic microeconomics come to the fore in the business management and personnel management area of a company. Followers of this approach like Sadowski, Beckes-Gellner, Wolff et al. assert that all business management considerations can be led back to politico-economic assumptions and postulate three fundamental assumption on behaviour as self-evident. These are: Individual utility maximization Opportunism (pursuit of own interest of employees and of the company, with the opportunism going as far as to cause harm to others). The formal rationality: i.e. nobody willingly harms themselves, which can be supported and proved by the impact of assumptions of behaviour under the property rights approach, principal-agent-theory, transaction cost theory etc. However, several points are to be criticized. According to Bofinger for example (cf. Bofinger 2003, p. 20), labour economics are subject to rationality traps. These exist because the microeconomic rationality does not conform to the macroeconomic rationality (cf. Bofinger 2003, p. 20). National economics show how efficient labour markets are and detect their limits. Economic personnel concepts formally work with the presentable models of microeconomics, which pretend to be able to describe, analyse and foresee human behaviour. However they avoid the controllable reference of personnel controlling and thus, the concrete application in business management as defined by Schmalenbach. Info: Personnel economics are inspiring for business economists, but the general conditions and statements of this concept are not helpful in the daily business of a company. This relates to any concrete business situation, in which it is necessary to steer and design company processes with controlling instruments and to translate them into previously calculable conclusions, which are presented with book-keeping, cost-accounting <?page no="38"?> 1.5 Labour economics: a macroeconomic concept 37 and results accounts, in investment and financing as well as in the annual financial statement. Fig. 6: Personnel management concepts in comparison Based on Schmeisser 2008, p. 1 subs. For that reason personnel economics are not empirically verifiable with their fundamental procedure in companies, because the politico-economic rationality of procurement decisions under market conditions cannot be found in the microeconomic rationality of the company, i.e. in accountancy. An empiric research, with the aim to apply instruments, techniques, key figures and functions of personnel management in the company, can only be achieved with the help of finance-oriented personnel management. <?page no="39"?> 38 1 Theories on personnel management Furthermore, research intense industrial companies always count on the creation of new value-oriented knowledge with innovative business models and do not ask for “homogeneity of human capital”. The research and development and production area in the company with knowledge-based human capital is obliged to foster methodical inventions and systematic innovation management, in order to develop competitive business models. The knowledgebased human capital has to be implemented in the production and marketing and secured with personnel management, but this means a further difference between business management contemplations and politico-economical human capital considerations. L Liitte erra attu urree This chapter is based on: Schmeisser, Wilhelm; Andresen, Maike; Kaiser, Stephan (2013): Personalmanagement. UTB basics, Constance/ Munich (chapter 1). Related Literature: Backes-Gellner, Uschi; Lazear, Edward P.; Wolff, Birgitta (2001): Personalökonomik. Schäffer-Poeschel Verlag: Stuttgart (Read chapter I: Betriebliche Bildungsmaßnahmen als Investitionen in Humankapital) Bofinger, Peter (2003): Grundzüge der Volkswirtschaft. Eine Einführung in die Wissenschaft der Märkte. Munich. Braverman, Harry (1980): Die Arbeit im modernen Produktionsprozeß. Campus Verlag: Frankfurt/ Main (Read Chapter 4: Wissenschaftliche Betriebsführung) Bröckermann, Reiner (2003): Personalwirtschaft. 3 rd edition, Schäffer- Poeschel Verlag: Stuttgart (read chapter 1.4: Personalwirtschaft) Dale, Ernst (1972): Management, Econ Verlag: Düsseldorf / Vienna (Read: Second Part: Die Anfänge des modernen Managements) Hentze, Joachim (1986): Personalwirtschaftslehre 1. 3 rd edition, UTB Taschenbuch, Munich (Read I. part 3: Das Zielsystem der Personalwirtschaft) <?page no="40"?> 1.5 Labour economics: a macroeconomic concept 39 Holtbrügge, Dirk (2004): Personalmanagement. Springer Verlag: Berlin (Read chapter 2: Theoretische Grundlagen des Personalmanagements) Sadowski, Dieter (2002): Personalökonomie und Arbeitspolitik. Schäffer-Poeschel Verlag: Stuttgart (Read chapter B 4.) Scherm, Ewald; Süss, Stefan (2003): Personalmanagement. Verlag Vahlen: Munich (Read part I: Personalmanagement und Personaltheorie) Schmeisser, Wilhelm (2008): Finanzorientierte Personalwirtschaft. Oldenbourg Verlag: Munich (Read chapter I) Schmeisser, Wilhelm; Clausen, Lydia (2009): Controlling und Berliner Balanced Scorecard Ansatz. Oldenbourg Verlag: Munich (Read chapter III, Berliner Humankapitalbewertungsmodell) Steinmann, Horst; Schreyögg , Georg (1990): Management: Grundlagen der Unternehmensführung. Gabler Verlag: Wiesbaden. <?page no="42"?> 22 CCaallccuullaattiioonn ooff sseelleecctteedd ppeerrssoonnnneell mmaann-aaggeemmeenntt iinnssttrruummeennttss aanndd nnuummbbeerrss ooff tthhee a annnnuuaall ffiinnaanncciiaall s sttaatteemmeenntt f foorr tthhee BBeerrlliinn BBaallaanncceedd S Sccoorreeccaarrdd A Apppprrooaacchh Personnel accountancy is a system for the quantitative and valuerelated determination, processing and presentation of personnelmanagement related occurrences within a certain period (cf. Coenenberg 2003, p. 3). Goals of the “finance-oriented personnel management” are the evaluation of for example (labour) productivity, revenues and value creation per employee, but also personnel costs and human capital. Info: Accounting is traditionally divided into accountancy systems, which provide information to internal and external addressees with different needs for information. Those two systems are adapted to their interests and go along with different methods and goals. While internal accounting primarily targets the informational need of the management in the company, external accounting has the task to provide information to external addressees and investors. 22..11 CCoonnnneeccttiioonn ooff tthhee aaccccoouunnttiinngg ssyysstteemmss iinn tthhee aannnnuuaall ffiinnaanncciiaall ssttaatteemmeenntt Only big capital companies connect their four accounting systems in the annual financial statement, offering a comprehensive picture of the assets position, financial standing, earning position and cash position of a company. The balance sheet is the core of accounting and shows the structure of assets and liabilities and equity. Because of it only presents the situation at a key date, it cannot make statements on the earning power or the liquidity of a company. The cash flow, which shows the origin of incoming and outgoing payments, can be derived <?page no="43"?> 42 2 Calculation of selected mangement instruments from the statement of comprehensive income and the partial gross statement of changes in financial positions. The annual financial statement is the basis for personnel controlling and the Berlin Balanced Scorecard Approach. Fig. 7: Connection between accounting sheets in the accounting statement Based on Pellens, 2008, p. 163 22..22 PPeerrssoonnnneell ccoonnttrroolllliinngg aanndd tthhee BBeerrlliinn BBaall-aanncceedd SSccoorreeccaarrdd AApppprrooaacchh Controlling is an essential sub-discipline within accounting. It has several functions. The external, past-oriented accounting is confronted with the internal accounting entity. In modern references the internal accounting is referred to as Controlling. Within the cost and activity accounting the value and quantity of resources consumed as well as the goods and services produced are recorded within a short period of time (cf. Coenenberg 2003, p. 5). Thereby a basis for decision making for a successful, future-oriented company management and inter alia a finance-oriented personnel management shall be provided. Those reports are helpful, if they are provided in a standardized, prompt and need-driven manner to the <?page no="44"?> 2.2 Personnel controlling and the Berlin BSA 43 decision makers of personnel management. The decision relevant data is processed and analysed from finance accounting. There is no need for legal regulations, but the accounting must be organized in accordance with the requirements of the management of the company, inter alia of personnel management. Personnel controlling oversees the manifold and complex personnel management information systems, which predominantly provide appropriate key data for corporate planning and management. 22..22..11 PPeer rssoonnnneel l ccoonnttrroolllliinngg aas s iinntte er rnnaal l i innffoorrmmaat ti ioonn ssuuppppllyy Information supply and information demand following own goals which are directed by the company. A successful realisation of an information system depends on the fulfilment of the need for information. The following figure shows that more data is supplied and demanded than the management needs for decision making. This excess is not efficient. It requires a multiple, appropriate control of the same data. Fig. 8: Supply of information. Based on Gladen, 2011, p. 2. At the same time there is a lack of information for the management, which can lead to erroneous decisions. The goal of information supply is to offer (personnel) key data which satisfy the <?page no="45"?> 44 2 Calculation of selected mangement instruments need. In the context of growing corporate information demand due to the global activities of a company, controlling has a fortiori the task to arrange and maintain an appropriate information provision system. The German Accounting Law Modernization Act (Bil- MoG) directs the need in the direction of international accounting and foregrounds the control and accounting function even further (cf. Funk/ Rossmanith 2011, p. 71). 22..22..22 PPeer rssoonnnneell ccoonnttr ro olllliinngg a as s ccoooorrddiinnaat to orr o off tthhee ppeer rssoonnnneel l mmaannaag geemmeen ntt ssy ysst teemm Traditionally controlling is the advisor of the company management and supplies relevant information, which are based on accountancy data. Personnel controlling fulfils a management function. The support of strategic planning, controlling and supervision is at the core of daily business. Figures, processes and interdependencies are regularly modelled in order to support the management in the decision making process (cf. Eberlein, 2010, p. 2). The company success is based on the success of controlling (cf. Weber 2009, p. 4 and Eberlein, 2010, p. 3). Future-oriented personnel controlling uses planning (data) and compares it with the actual data in order to change the strategy or measures on the basis of the deviations, in order to achieve the target company results, including personnel results in the next annual financial statement. This way, the targets for the following periods and budgets in the individual fields with regard to financial as well as personnel-related aspects are bundled and continuously supervised. Besides designing the content of personnel management, personnel controlling has the task to coordinate and analyse personnel activities and to contribute to the establishment of personnel reports (inter alia personnel statistics). The information demand and supply have to be coordinated and shall avoid the loss of information to planning and controlling (cf. Horváth, 2003, p. 126). <?page no="46"?> 2.3 Balanced Scorecard 45 22..3 3 BBaal laan ncce edd SScco orreecca ar rdd -- AA ppeerrssoonnnneell PPeerr-ffoorrmma an ncce e MMa annaag geemme enntt AApppprrooaac ch h 22..3 3..1 1 TTrraaddiitti ioonna all ppeerrffoorrmmaannccee mmeea assuurreemmeenntt ssyyss- tteemms s ooff ppeerrsso onnnne ell ccoonnt trroolllliinng g Definition: Key data are expedient quantitative data describing complex situations, e.g. regarding personnel management in a compacted way and thus offer support for decisions related to (personnel management) problems (cf. Küting/ Weber, 2009, p. 60 and Eberlein, 2010, p. 287). Performance measurement systems connect two or more key data chronologically and factually in a certain order, they complement and explain each other and are related to a superordinate goal (cf. Horváth, 2003, p. 555). Performance measurement systems are classification systems or calculation systems or mixed forms depending on the key data in use (cf. Schmeisser/ Clausen, 2009, p. 11). A classification system A calculation system classifies situations on the basis of experience without mathematical foundation and permits a specific analysis of e.g. a business area. divides key data mathematically and factually into smaller units and offers an overview over the cost and capital structure. It provides a comprehensible top key figure. Tab. 2: Schema of capital market-oriented human capital assessment/ human resource evaluation Traditional performance measurement systems, especially the Return on Investment Approach will now be presented in order to provide a transition to a modern performance measurement system, namely the Berlin Balanced Scorecard Approach. <?page no="47"?> 46 2 Calculation of selected mangement instruments 22..33..22 RReet tu urrnn--oonn--IInnvvees sttmmeen ntt -- aa ppeer rssoonnnneel l p peer rffoorr-mmaan nccee aap ppprrooaacchh The Return on Investment (ROI) is the top key data and it consists of the asset turnover and the operating profit margin. The ROI is at first the generated yield (interest rate) on the employed (total) capital (cf. Schmeisser/ Hannemann/ Krimphove/ Toebe/ Zündorf, 2012, p. 1ff.). The Return-on-Investment-System was created in 1919 by the chemical corporation DuPont and continuously developed thereafter. = = The asset turnover is influenced by fixed and current assets. = This ratio can only be improved with a reduction of the capital employed. A reduction of fixed assets could be achieved via personnel saving logistic systems or a reduction of current assets via a decrease of inventory in raw materials and supplies and a reduction of receivables. In the case of the current assets the encashment of money via a strict reminder system and the usage of collection services or renting of unused capacities could lead to an improvement of the asset turnover and a reduction of receivables. The operating profit margin can be improved via a reduction of (personnel) costs, increase in prices or sales. = After those three top key figures, the mathematical business management system only uses absolute key data, which serve the analysis of earning, expenses, assets and capital (cf. Küting/ Weber, 2009, p. 61). <?page no="48"?> 2.3 Balanced Scorecard 47 The complete DuPont Performance Measurement System is presented in the figure below. This simple, easy-to-understand construction and the clarity of the ROI as Performance Measurement Systems permit the usage as planned/ actual Performance Measurement System. ROI = Return on Investment or ROIC = Return on Invested Capital are the same Key Performance Measurement Systems. The ROIC has prevailed with the value-oriented company and personnel management. (cf. Volkart, 2008, p. 330). The ROI connects the annual financial statements with its two calculation sheets, the balance sheet and the profit and loss statement in one single key figure. The ROI also allows controlling and calculating the use of personnel strategies and measures. Example: The decrease of variable personnel costs e.g. by 20% allows an increase of the ROIC by up to 10%. Fig. 9: ROI key data tree, Based on Horváth 2003, p. 557. <?page no="49"?> 48 2 Calculation of selected mangement instruments The disadvantage of the ROI System is that the performance management is often not directed towards company and personnel strategies, which leads to a short term success orientation by the managers and supports the goal of short term profit maximisation. This comes at the expense of e.g. the research and innovation activities as well as personnel development and knowledge-based human capital. Only a resource-oriented management approach of strategic management in connection with the Berlin Balanced Scorecard Approach of finance-oriented personnel management can put things right. Info: The decentralized structure of individual (functional) areas can lead to suboptimal circumstances. Furthermore, the unilateral analysis of financial key data is strongly criticized, because e.g. the employee and customer perspective as well as research and development are not taken into consideration. For almost every company the increase of productivity is decisive, because it is the key to a long term freedom of action, which allows faster reactions to market changes, bigger investments and the persistence in critical situations. The introduction of a progressive company management concept is important to be able to ensure sustainable profitability. Only when all perspectives of company activities are coordinated, observed and controlled, the management system is progressive. Only with the exact knowledge of competition and success drivers of a company, risks can be detected and negative consequences be avoided. For this reasons companies are looking for such a performance management system. Since the 1990s they have been looking into the Balanced Scorecard by Kaplan and Norton, which integrates hard and soft key figures of a company, in order to better understand the complexity of a company (cf. Eiselmayer, 2008, p. 64). 22..33..33 BBaal laan ncceed d SSccoorreeccaar rdd aas s i innssttr ruummeenntt ffoorr ssttrraatt- eeg gyy iimmpplleem meen nttaat ti ioonn In 1996 R.S. Kaplan and D.P. Norton created the fundamental work “The Balanced Scorecard. Translating Strategy into Action”. The point of departure for the Balanced Scorecard (BSC) considerations were the substantial deficits in management practice of <?page no="50"?> 2.3 Balanced Scorecard 49 companies with relation to strategy implementation (cf. Ehrmann, 2007, p. 12). The fixation on financial and, thus, past-oriented key data of (personnel) performance measurement was the main object of criticism of the classical controlling and key data systems, like the ROI approach. The BSC is a holistic Performance Management concept which takes further than only the financial aspects of company management into consideration. With the Harvard BSC approach by Kaplan/ Norton the limits of traditional key performance systems and performance management systems shall be overcome with a holistic consideration of and influence on also future performance drivers and success factors. The relation to customers, the quality of internal organization processes and especially the research, innovation and human resource potential are taken into account and influenced. Originally, the authors described the BSC as structured, wellbalanced key performance measurement system. In further publications especially the implementation of the strategy was focused (cf. Matlachowsky, 2010, p. 37). Thus, the originally holistic key performance measurement system has developed into a structured management system in recent years, which was supposed to translate the strategies developed into concrete strategic actions (cf. Horváth/ Partner, 2001, p. 22). The BSC as management instrument was able to point out the strategies and their implementation. 22..33..44 BBaal laan ncceedd S Sccoorreeccaar rd d t te er rmmiinnoollooggyy There is no standard definition of the Balanced Scorecard. Studies on its application showed that the original BSC is used in many variants in practice. The Balanced Scorecard is a key data based controlling instrument with several, balanced perspectives. 22..33..55 GGooaal l aan ndd ssccooppee ooff a acctti ioonn o off tthhee b baal laanncceedd ssccoorreec caar rdd The BSC shall operationalize and present strategies and examine the implementation with the help of controlling. With the implementation of the BSC the likelihood of a compatible strategy is improved. This can be explained by the fact that for each strategic goal measures for the achievement of this goal are developed and the status of implementation is checked via key indicators and key <?page no="51"?> 50 2 Calculation of selected mangement instruments indicator hierarchies. The following figure shows the strategic scope of action within the conceptual management process: Fig. 10: Strategic Scope of action of the BSC Based on Kaplan/ Norton 1997, p. 10. Strategic goals can be deducted from the vision and the “explicit” company strategies, which have to be prepared in cooperation with the managers (cf. Weise/ Wöhler 2003, p. 2). This way an overview over a strategy which often implicitly only exists in the managers’ heads is provided. As the Balanced Scorecard is a Top-Down Approach of the managers, in a second step the strategy needs to be communicated to the succeeding areas with the help of the Balanced Scorecard. The operative goals of the different departments, teams and employees are continuously compared with the operative goals deducted from the business area strategies. With the determined strategic measures a connection between the strategic and the midterm and operative planning should be created. This way the allocation of resources can be adapted to the company strategy, even if they cannot be quantified yet. The quan- <?page no="52"?> 2.3 Balanced Scorecard 51 titative cause-effect relation is of special importance. It allows to develop key figures and success indicators which should be measured and developed and which influence planning, budgeting and target-setting. Communication and the purposeful determination of actions shall serve to make the success factors more transparent and to detect milestones, as Kaplan and Norton are convinced that the BSC is not quantifiable. A comparison between the qualitative and quantitative target-performance outcomes continuously facilitates the corresponding feedback with regard to the “communicative correctness” of the targets set for the implementation of the strategy. The performance accomplished can be connected with an incentive system. Continuous feedback is supposed to promote learning and thus, a constant improvement of organization processes in the business model. 22..33..66 BBaal laan ncceed d SSccoorreeccaar rdd S Sttr ruuccttuurree In accordance with Horváth & Partner the Balanced Scorecard combines numerous known elements of management, e.g. goals, key figures, action schedules, with new approaches of strategy representation, strategic thinking and differentiation of strategic and operative targets. (cf. Horváth/ Partner 2001, p. 18). 22..33..77 CCo onnttrroolllliinngg ppeer rssppeecctti ivvees s o off tthhee BBaal laanncceed d SSccoorreeccaar rdd In accordance with Kaplan and Norton a strategy can be considered to be complete, if it can provide measured values for the essential controlling areas of the company. For Kaplan and Norton a long-term success does not only mean that the financial income is higher than the expenditures. For them the overall success of the company depends on several factors (cf. Preißner, 2008, p. 19). However, they do not explain in their work how the overall success should look like in form of a measurement value. As already mentioned, for them it is not sufficient to concentrate on financial goals only. They show only soft approaches, but do not provide information on cause-effect relations of the four perspectives. Company-related or sector-specific adaption can and must be <?page no="53"?> 52 2 Calculation of selected mangement instruments taken into consideration (cf. Paul, 2002, p. 55). However, the authors do not provide any instructions on that either. 22..33..77..11 FFiinnaanncciiaall ppeer rssppeec cttiivvee Shareholders and investors expect a maximum of interests for their capital invested. The request return is therefore in the focus of the Financial Perspective. It is central because it makes clear whether the actions lead the company strategy with the help of the BSCconcept to success or failure, even though they deny that at another point of their work. It contains those targets and key data, which allow measuring the financial results of strategy implementation. The Financial perspective represents above all company results which are easy to measure and of short-term nature (cf. Kaplan/ Norton 1997, p. 36). As the financial success can be presented as result, the Financial perspective is connected to the other perspectives as final goal, which is a little astonishing due to the diverse, controversial statements by Kaplan and Norton. 22..33..77..22 CCuusstto ommeerr ppeer rssppeec cttiivvee High customer satisfaction leads to a long term customer loyalty to the company, which again leads to a stable financial situation of the company (cf. Preißler, 2008, p. 24). The Customer Perspective comprises the identification of targets with respect to customers and market segments in order to achieve the financial goals. On the one hand this includes targets with regard to market representation and the market position and on the other hand how the clients perceive the company’s performance (cf. Schmeisser/ Clausen, 2009, p. 40). Sector comparisons and the analysis of competitors are central for the market positioning and the understanding of the company’s advantages. However, there is a lack of concrete targets and target hierarchies in this perspective and it is not clarified how the customer perspective should be connected with key figures and methods of internal and/ or external accounting of the financial perspective. <?page no="54"?> 2.3 Balanced Scorecard 53 22..3 3..7 7..3 3 PPrroocceessss ppe errssppe eccttiivvee In this perspective the organizational processes in accordance with Porter’s value creation chain are considered. These should lead to a positive perception of the company by the customer. They are identified as competitive advantages. At the end optimal, internal, organizational systems and processes lead to a more economical production and to more satisfaction with the customers, which again contributes to an improvement of financial results as desired by the investors. The classical target triangle of process organization is used in this case, which measures quality, costs and time (cf. Bischof, 2002, p. 107). Unfortunately Kaplan and Norton have no quantitative suggestions on this internal perspective and leave it at more or less “communicative” arguments. As a result they have no suggestions on how to connect the perspective cause-effect-wise with the other perspectives. 22..33..77..44 LLeeaarrnniin ngg aanndd ggrroowwtthh ppeerrssppeeccttiivvee In order to achieve the company targets, a corresponding infrastructure has to be available. (cf. Schmeisser/ Clausen, 2009, p. 100). Investments in the future, e.g. in qualification and motivation of employees, modern technique and IT-systems as well as into the innovation capacity of a company are precondition of future capability of growth and adaption. Motivated employees contribute fundamentally to target achievement, because they are more prepared to perform. Employees are motivated when everything they need, e.g. hardware, software and information to perform the target leading work is at hand. Info: Also in case of this perspective it is not surprising that Kaplan and Norton do not go beyond the above “qualitative” argumentation. There is nothing left regarding the hierarchy of key data or the connection with other perspectives. 22..33..77..55 CCoonnnneec ctti ioonn bbeet tw weee en n tth hee ppeer rssppeec cttiivvees s Kaplan and Norton recommend that the perspectives with their target should not be considered in an isolated manner, but do not solve that problem. There is a cause-effect relation between them. <?page no="55"?> 54 2 Calculation of selected mangement instruments The accomplishment of one goal should also lead to the achievement of further targets (cf. Kaplan/ Norton 1997, p. 28ff.). Fig. 11: 4 BSC perspectives. Based on Kaplan/ Norton 1997, p. 9. It is necessary to describe cause-effect relations, in order to be able to examine the relevant relations for causality and integrity. 25 key figures should be determined for a BSC on average, but Kaplan and Norton do not adhere to that either (cf. PwC, 2001, p. 25). The number of key figures chosen per perspective is varying. In a PriceWaterhouseCooper study on the status of BSC implementation in German companies a range of 2 to 10 key figures was found for the different perspectives (cf. Brabänder/ Hilcher, 2001, p. 255). Perspectives and key figures have to be adapted in accordance with sector and company specific requirements, as well as the agreed strategy (cf. Paul 2001, p. 55). In order to accommodate the fact that the company success is determined by more than just the financial data, they request an equal emphasis on all controlling perspectives. <?page no="56"?> 2.3 Balanced Scorecard 55 22..3 3..7 7..6 6 PPeerrffoorrmmaannccee ddrriivveerrss aanndd eeaarrnniinngg iinnddiiccaattoorrss In accordance with Kaplan/ Norton a good Balanced Scorecard contains outcome measures (lag indicators) as well as performance drivers (lead indicators) of the business strategy. Outcome indicators are mostly financial indicators. They indicate via the performance drivers - which are mostly non-financial measures - how an outcome has been reached. Performance drivers clearly indicate whether a strategy has been successfully implemented, because they measure the cause of an outcome and translate it in a competitive advantage. (cf. Kaplan/ Norton 1997, p. 30). Lag indicators are data, which can be taken from the annual financial statement at the end of the fiscal year, i.e. from the income statement, balance sheet and annex. The data of the annual financial statement reflect the desired final end points. Appropriate outcome measures are amongst others: ROI Sales revenues Market share Customer satisfaction Lead indicators are for example image, technical equipment, employee potential, customer relations etc. The equilibrium between financial and non-financial measures and lead and lag indicators cannot be absolutely determined. Today, soft factors play a decisive part for securing competitive advantages on a long term basis. The proportion depends on the weighting of the targets and measurements used. In accordance with Kaplan/ Norton a constructive Balanced Scorecard should have a balanced mixture of outcome measures (lag indicators) and performance drivers (lead indicators) in the business strategy (cf. Schmeisser/ Clausen, 2009, p. 78). Example: A PwC research from 2000 showed that German companies, which implement a BSC, use performance drivers and outcome measure in a proportion of 40% to 60%. Financial and non-financial indicators are applied in a proportion of 50% to 50% (cf. PwC, 2001, p. 26). <?page no="57"?> 56 2 Calculation of selected mangement instruments 22..33..77..77 CCaauussee- -eef ff feec ctt rreel laatti ioonn bbeet twweee en n tth hee tta arrgge et ts s The strategic targets and figures contained in the different controlling perspectives cannot be considered independently from each other. In the BSC concept they shall have a tight connection due to the cause-effect relation. When a strategic target within a perspective is achieved, this helps to achieve all further targets in the other perspectives and thus, to implement the overall strategy (cf. Kaplan/ Norton 1997, pp. 28). Fig. 12: Example of cause-effect relations in a BSC Based on Horváth/ Parner, 2001, p. 13. With this connection relations between the targets in different perspectives can be obtained and the strategy of the company can be shown with all its interdependences (cf. PwC, 2001, p. 33). The identification and presentation of strategically relevant relations in order to exam the consistency and integrity of the existing target systems is a central part in the BSC development. Figure 11 shows one of the few cause-effect relation chains depicted by Kaplan/ Norton. It shows the vertical as well as horizontal <?page no="58"?> 2.3 Balanced Scorecard 57 vector of the four standard perspectives (cf. Kaplan/ Norton, 1997, p. 29). 22..33..77..88 MMeeaassuurrees s ffo orr ssttrraatteeg gy y iimmpplleem meen nttaatti ioonn It is necessary to integrate the BSC into the planning and budgeting process in order to achieve a constructive usage of financial resources and material. Operative measure packages and milestones shall be formulated. Hereby the strategy is translated into the operative business process. Each measure is described with regard to its measurable effect and supported with a project plan for implementation. This shall make sure that the status of the implementation of the measure with regard to the contribution to the company target can be controlled at any time (cf. Schmeisser/ Clausen, 2009, p. 52). Whether the resulting gap should be closed by continuous improvement or radical change, has to be decided by the management. Synergy effects should be recognized and used. Conclusion: The Harvard BSC concept by Kaplan/ Norton is per se acceptable, but does not offer any concrete target recommendations. Only the Berlin Balanced Scorecard faces this problem with all its consequences. <?page no="60"?> 33 BBeerrlliinn BBaallaanncceedd S Sccoorreeccaarrdd A Apppprrooaacchh 33..11 CCoonncceeppttiioonn Schmeisser and Clausen show in their book “Controlling und Berliner Balanced Scorecard Ansatz”, that it is possible to make the Harvard BSC in all perspectives calculable, to connect the perspectives and to extrapolate it over the time (to render it dynamic). The following figure does not only show instruments and methods, which allow to allocate performance measurement to all four perspectives, but also how they can be quantitatively connected. With the help of value-oriented company evaluation models, like the Economic Value-Added Concept (EVA) (cf. Baetge/ Kirsch/ Thiele, 2004, pp. 461) the BSC can be rendered dynamic. Fig. 13: BSC Approach on the calculability. Based on Schmeisser 2002. <?page no="61"?> 60 3 Berlin Balanced Scorecard Approach With the help of the publicly accessible data from the annual financial statement of the BASF group it will be shown, explained and proved that the Berlin Balanced Scorecard renders calculations possible. Due to the usage of externally accessible data the results determined can be imprecise, which does not undermine the empiric proof of the calculability of the Berlin Balanced Scorecard Approach or later of the Berlin Human Capital Assessment Model. In fact a constructive remuneration management can be developed as incentive system for employees and managers. This permits to “solve” the principal-agent problem via share option plans in the variable part of the income. 33..22 AApppplli ic caattiio onn o off tthhee BBeer rlli in n BBaalla anncceed d S Sccoorree- ccaarrdd AApppprrooaacchh 33..22..11 DDaat taa bbaas siiss ( (ccff.. AAnnnnuuaal l ffiin na anncciiaal l s stta at teem meen ntt 22001100 BBAASSFF) ) Certain preliminary works and conditions are the basis for an annual financial statement analysis. At first the statements have to be made comparable. This can only be achieved if the annual financial statements are prepared and examined in accordance with certain norms. The annual financial statement 2010 of the BASF group was prepared in accordance with the German Commercial Code (HGB) as well as the IFRS norms. The annual financial statement analysis is focused on the group report, which underlies IFRS norms. Balance sheet and income statements are the main sources for the determination of key indicators. Further measures are taken from the annex and the status report. The indication of the figures from the previous year is especially helpful with regard to the actual - target comparison, target - target comparison as well as the target - forecast comparison. <?page no="62"?> 3.2 Application of the Berlin Balanced Scorecard Approach 61 33..2 2..2 2 OOnn ccoonnnne ecctti inng g tthhee ffiinnaannc ciiaall aannd d ccuusst toommeerr ppeerrssp peecct ti ivvee 33..2 2..2 2..1 1 FFiinnaanncciiaall ppe errssppe ec cttiivve e There is a conflict of interest between liquidity, profitability and security/ risk for investors/ shareholders who want to invest their money in the project “BASF-share” instead of another project. The financial key indicators serve as “absolute” measure for all other key figures of the other perspectives. In case of a multitude of data, those have to be selected, which are important for the company strategy in question (or personnel strategy in the case of human capital) (cf. Gladen, 2011, p. 374). For the analysis of liquidity and profitability the IFRS norms are especially beneficial, because the indicators are structured in accordance with the degree of liquidity. Liquidity is the capability to fulfil the financial obligations at any moment and thus to continue company business (cf. Coenenberg, 2005, p. 1001). The profitability is proof of the success power and competitive capacity of the company. 33. .22. .22. .22 PPrroof fiit taabbiil li ittyy rraattiio os s The profitability, which is expressed as ROI, gives information on the relation between the sales revenues earned and the assets or capital employed (cf. Coenenberg, 2005, p. 1080). With the help of the ROI as actual profitability measure, deviations from the target can be calculated and potential causes of the deviations analytically determined. Its components - the operating profit margin and the capital turnover - can be broken down to the underlying types of expenditures and incomes (cf. Coenenberg, 2005, p. 1080). The revenues taken from the annual financial statements from 2010 and 2009 minus the corresponding variable costs are the profit contribution (cf. Wöhe/ Döring, 2008, pp. 980). In 2010 the profit contribution was €18,563 million and in 2009 €14,011 million. <?page no="63"?> 62 3 Berlin Balanced Scorecard Approach Fig. 14: Financial perspective BASF 2010/ 2009 The gross proceeds of € 63,873 million for 2010 and € 50.693 for 2009 taken from the income statement minus the variable costs of € 45.310 and € 36.682 million make a profit contribution of € 18,563 and € 14,011 million. Then the fixed costs of €10,802 million or €10,334 million are subtracted from the profit contribution to obtain the profit. The earnings before taxes of € 7,761 million for 2010 and € 3,677 million for 2009 put in relation to the revenues make an operating margin of 12.2% for 2010 and 7.3% for 2009. The revenues put in relation with the invested capital € 53,115 million and € 46,042 million make a capital turnover of 1.2 and 1.1, i.e. that the tied capital has been turned over the revenues 1.2 or 1.1 times. The comparison between the two periods makes clear that the capital turnover has only slightly increased. Furthermore, it becomes clear, that on the asset side the current assets have increased by about 12% and on the earnings side of the income statement the revenues have increased by about 12%. <?page no="64"?> 3.2 Application of the Berlin Balanced Scorecard Approach 63 The operating margin has increased by 16% in comparison to the previous year, which can be ascribed to an increase of profit before taxes by 21% and an increase of the sales revenues by 12%. The calculation shows an increase of the ROI, which was 14.6% in 2010 and 8% in 2009. This allows the creation of a reference value in order to assess the financial success of a company. Only a further purposeful division makes a detailed interpretation possible and a manipulation less likely. If for example a decreasing operating margin is compensated with a lower capital employment, the profit remains unaffected. Furthermore, fluctuation of the profit can be ascribed to changes of the operating margin or the capital turnover and therefore the reason for the oscillation is easier to detect. It needs to be pointed out that no reference is made to the future expectations of the company. For a value-oriented consideration the Economic Value Added (EVA) could be used (cf. Baeetge/ Kirsch/ Thiele 2004, pp. 461), which also takes future cash flows into considerations. 33..22..22..33 VVaalluuee oorriieen ntte ed d kkeey y iinnddiiccaatto orrss Since 1986 when Rappaport published the Shareholder Value Approach, the actual cash value of future cash flows has become an indispensable indicator for the company evaluation in the context of the annual financial statement analysis, but also of the Berlin Human Capital Assessment Model of the Finance oriented Personnel Management. All management activities are targeted towards the increase of the market value of the equity or the human capital as partial value. The cash flows are not subject to the manipulation possibilities of balance sheet oriented measures (cf. Coenenberg, 2005, p. 157). The company assessment approach “EVA” is similar to the traditional ROI system. Furthermore, the EVA approach can be integrated into the Berlin BSC system and permits to make the BSC more dynamic. Besides, the EVA approach is easily accepted within the company and can be used as basis for a share option program. Figure 14 shoes the EVA key figure structure. <?page no="65"?> 64 3 Berlin Balanced Scorecard Approach Fig. 15: EVA performance measurement syste Source: Schmeisser/ Clausen, 2009, p. 120. Using the numbers from the annual financial statement of the BASF group the following performance measurement system can be constructed: An increase of the company value can only be achieved if NOPAT > capital costs (cf. Baetge/ Kirsch/ Thiele, 2004, pp. 461). The NOPAT (Net operating Profit after TAX) equals the EBIT (Earnings before Interests and Taxes) minus taxes. If the NOPAT is bigger than the weighted average cost of capital, the company value is increasing. I.e. 2009 there was no increase in value. In 2010 a value increase of about € 1019 million was achieved. The Weighted Average Cost of Capital is the average costs of capital of the total capital for the whole company. It is composed by the capital costs of equity and capital costs of debt (cf. Volkart, 2008, p. 188). The Working Capital plays a decisive part in the context of liquidity assessment of a company with regard to further investment options. <?page no="66"?> 3.2 Application of the Berlin Balanced Scorecard Approach 65 Fig. 16: EVA performance measurement system with data from the annual financial statements It equals the difference between current assets and short-term liabilities. The question behind that is whether and to what extent short--term liabilities are covered by current assets. Definition: Net Working Capital equals current assets minus short-term liabilities (cf. Volkart 2008, p. 106). In the above example € 15,466 million and € 19,463 million were not needed to pay for short-term liabilities in 2009. In 2010 coverage of the future debt improved. Thus, e.g. the excess of Working Capital is available for other management targets, e.g. for carrying out research and development activities, to promote innovation and knowledge based human capital, but also for undertaking all other personnel development measures, in order to maintain and increase the competitiveness of the company (cf. Schmeisser/ Clausen 2009, p. 293). <?page no="67"?> 66 3 Berlin Balanced Scorecard Approach The Working Capital shows how liquid assets can be set free in the company. This excess of liquid investment funds improves the future investments in intangible company assets, e.g. human capital. With the help of this key indicator e.g. the following further key indicators can be identified: = 2010 = 19,463.00 63,873.00 = 0.30 2009 = 15,466.00 50,693.00 = 0.31 The Working Capital Intensity of both years is nearly identical. This means that for each Euro 30 cents or respectively 31 cents are tied in Working Capital on the average. = 365 2010 = 7,103,995.00 63,873.00 = 111,22 2009 = 5,645,090.00 50,693.00 = 111.36 Also concerning the Days of Working Capital there is no big difference between those two years. In this case it was calculated that the turnover had to be pre-financed for a period of 111 days in advance. 33..22..33 CCu ussttoommeer r ppeerrssppeecctti ivvee: : A A mmaar rkkeet ti inngg p peer rssppeecc-ttiivvee The key indicators of the customer perspective depict the view of the customers on the company. The key indicators offered by Kaplan and Norton are market share, image, service offers, customer loyalty, acquisition of new customers, customer satisfaction, customer profitability. These key indicators should give information on customer market segments. However, the authors do <?page no="68"?> 3.2 Application of the Berlin Balanced Scorecard Approach 67 not indicate how to create a causal link between the key indicators in a key figure hierarchy (cf. Preißner, 2008, p. 34). Instead, the Berlin BSC chooses the contribution margin accounting, which offers a clear overview over the structural profitability connections as a function of the operating level and its most successful products, services or branches. Taking expenses/ costs and income/ revenues per segment or business unit into account, a target-actual portfolio matrix on profits and losses, investment rates and risks of the company can be prepared. The management and control of the company with its business unit strategies becomes transparent and serves as basis for variable management salaries in form of share option programs (cf. Coenenberg, 2003, p. 261 and Eberlein, 2010, p. 203). The contribution margin (which corresponds to the cash flow from the external perspective of accountancy), as difference between sales revenues and costs for the quantity sold (cf. Eberlein, 2010, p. 194) gives information on which line of products contributes with which proportion to the coverage of fixed costs, which are used for the operational readiness of the company. A multi-stage contribution margin systematic is useful, in order to analyse where changes via specific measures in the operational area of the company have to be effectuated. In this approach fixed costs are separated from variable costs. The fixed costs are echeloned in a hierarchy. With the data from the annual financial statement the following figure can be drawn with the help of the contribution margin analysis and the cost of sales accounting. The individual as well as the overall contribution margin amounts to a percentage of 29% of the net proceeds for the coverage of fixed costs. In 2009 the variable contribution margins of the individual branches varied, as can be seen in the figure below. <?page no="69"?> 68 3 Berlin Balanced Scorecard Approach Fig. 17: Contribution margin analysis of branches 2009 Fig. 18: Contribution margin analysis of branches 2010. The overall contribution margin amounted to 28% in 2009. In comparison it can be said that in both years the proportion of production induced costs to sales revenues was nearly the same. The operational profit of € 7,3761 million in 2010 and € 3,677 million in 2009 shows an improvement of the performance in relation to the costs. In 2010 the contribution margin of the revenues amounted to 12% and in 2009 it amounted to 7%. The contribution margin provides fundamental, managerial information on branches (business units), products/ product ranges and/ or services, which e.g. have a positive contribution margin and contribute to the overall success of the company. The target is the maximization of the contribution margin. Only if compound effects/ synergy effects of the Balanced Scorecard exist, a group/ business unit with negative contribution margin can remain in the production range/ portfolio of a company (cf. Schmeisser/ Clausen, 2009, p. 109). <?page no="70"?> 3.2 Application of the Berlin Balanced Scorecard Approach 69 33..2 2..4 4 CCoonnn ne ecctti ioonn bbeettwweeeenn tthhee ccu usstto omme err--/ / mmaarrkkeett aannd d tth he e ffiinnaanncciiaall ppeerrssp peecctti ivvee The connection between financial and customer perspective is carried out via break even analysis. The top indicator of the financial perspective is the operating profit margin which can be presented in the contribution margin analysis. The break-even point (BEP) is reached, when the contribution margin equals the fixed costs. At this point a product, a service or branches makes no profit or loss. (cf. Coenenberg, 2003, p. 262). The costs have to be put on a level with the revenues, in order to obtain the critical revenue/ quantity combination. The break-even analysis is subject to some assumptions. (cf. Eberlein, 2010, p. 205): Variable costs have a proportional trend, i.e. a constant contribution margin per piece is assumed. Overhead costs can be separated into fixed and variable costs with acceptable precision Changes in inventory are not explicitly displayed. The management and control of products and services and branches can be carried out via the influence on variable and fixed costs, the sales volume and the sales prices. This leads to changes of the profit which belongs to the ROI accounting. A certain ROI planning corresponds to a determined profit planning, for which a corresponding sales volume (corresponding sales revenues) can be calculated. The initial equation is: Profit = sales volume x ( sales price unit costs ) fixed costs The same is valid for the operating profit, which is also part of the ROI calculation: The initial equation is: operating profit = = unit profit contribution x sales volume x fixed costs sales price x sales volume The annual financial statement of this example does not contain all necessary information for the above calculations. With the help of the data available the following calculation is alternatively applied: <?page no="71"?> 70 3 Berlin Balanced Scorecard Approach critical revenues = fixed costs sum of profit contributions total turnover This calculation is based on the sales revenues. The critical revenues equal the quotient of fixed costs and the sum of the profit contributions in relation to the turnover (cf. Küting/ Weber, 2009, pp. 355). critical turnover = fixed costs sum of profit contributions total turnover = 18,563 63,876 = 10,802 029 = 37,168 The total profit contributions in relation to the fixed costs equal a critical turnover of € 37,168 million in 2010 and € 37,389 million in 2009. That means that starting from that turnover all costs are covered by the turnover. critical turnover = fixed costs sum of profit contributions total turnover = 14,011 50693 = 10,334 0,28 = 37,389 The amount of turnover can be influenced via pricing and the sales volume, which again shows the connection to the customer perspective. The amount of turnover in relation to the costs of the company equals the profit or loss, which also shows the connection to the financial perspective. 33..22..55 OOnn tthhee ccoonnnne eccttiioonn ooff tthhee iinntteer rnnaal l p prrooccees ss s ppeer rssp peeccttiivvee aanndd tthhee eemmppllooyye eee p poot te enntti iaal l oorr hhuummaann ccaap piitta al l p peer rs sppeecctti ivvee aanndd tth hee f fiinnaanncciiaal l ppeer rssp peeccttiivvee 33..22..55..11 PPrrooccees sss aanndd ppootte en nttiiaall ppeerrssppeec cttiivvee In the process perspective it is analysed which processes are critical for the success of a company and for the achievement of the cus- <?page no="72"?> 3.2 Application of the Berlin Balanced Scorecard Approach 71 tomer or financial perspective. The process cost analysis can be used as internal analysis. The external financial analyst reverts to the value added statement, which, however, is also appropriate for the internal company analysis (cf. Weber/ Küting, 2009, p. 336). Value creation is the value of revenues, which is contributed by the groups participating in the company to the macroeconomic net domestic product (cf. Schmeisser/ Clausen 2009, p. 113). The value creation can be determined with different methods. The external financial analyst can take the necessary data inter alia from the public income statement. In the context of the value added statement the following conclusions can be drawn depending on the calculation method (cf. Schmeisser/ Clausen, 2009, p. 115 and Küting/ Weber 2009, p. 349). Income distribution Evaluation of the economic performance and productivity of a company Analysis of in-house production depth Analysis of company size and company growth Comparison of the company value creation development with the macroeconomic income development Departing from the public information the value creation is determined with the help of the statement of distribution, even if the statement of origin should be preferred due to its detailed scheme on the origination (cf. Coenenberg, 2005, p. 1107). The creation of company value within the statement of origin is based on the sum of operational proceeds, overhead proceeds, outside capital proceeds as well as the annual surplus or annual shortfall. The operational proceeds contain all payments like wages, salaries, remuneration of the supervisory board and advisory board as well as social security payments and contribution to old age pension. The overhead proceeds contain all income taxes and other taxes to be paid by the company. Foreign capital proceeds contain interests and similar expenses (comp. Küting/ Weber 2009, p. 346 and Coenenberg, 2005, p. 1111). <?page no="73"?> 72 3 Berlin Balanced Scorecard Approach The yield of factors employed can be presented with the help of productivity. It is a central driver of the future earning power of the company and can be understood as income of all groups of company shareholders (cf. Coenenberg, 2005, p. 1105). The values below are approximately calculated. The schematic presentation remains easy to understand. 2010 2009 Statement of distribution in million EUR in million EUR Personnel expenses 8,228 7,107 Remuneration of supervisory board 875 888 Success oriented variable remuneration 1,750 166 remuneration of committee work 188 191 Interim Sum of work proceeds 11,041 8,351 Income taxes and taxes on earnings 2,583 1,662 Interim Sum of total proceeds 2,583 1,662 Interests 623 600 Other financial expenses 64 131 Interim sum foreign outside capital proceeds 687 731 Annual surplus 5,074 1,655 Company value creation 19,385 12,399 Fig. 19: Value creation via statement of distribution 2010/ 2009 Based on Küting/ Weber 2009, p. 347. The company value creation in 2010 was € 20,117 million and in 2009 € 14,642 million. It is the performance indicator of the company for all stakeholders. Thus, the value creation is the most appropriate output indicator of the company. The value creation itself is not an appropriate index for the measurement of company success. Only the use of further data for the <?page no="74"?> 3.2 Application of the Berlin Balanced Scorecard Approach 73 calculation of diverse key indicators gives significance to the index (cf. Haller, 1997, p. 292). Productivity key figures show how well the production factors are used and show their potential. Capital productivity is appropriate for the assessment of the relation of the company output to the capital employed. Together with labour productivity it is one of the most common partial productivity key indicators (cf. Haller, 1997, p. 303). 2010 Labour productivity 0.18 On the average an employee creates a share of 0.18 of the total company output Value creation 19,385 Average number of employees 109,140 Capital productivity 0.36 On the average one Euro of the invested capital produces 0.36 Euro Value creation 19,385 Average employment of capital 53,115 Fig. 20: Capital and labour productivity 2010. Based on Coenenberg, 2005, p. 1115. 2009 Labour productivity 0.12 On the average an employee creates a share of 0.12 of the total company output Value creation 12,399 Average number of employees 104,779 Capital productivity 0.27 On the average one Euro of the invested capital produces 0.27 Euro Value creation 12,399 Average employment of capital 46,042 Fig. 21: Capital and labour productivity 2009. Based on Coenenberg, 2005, p. 1115. A comparison of the productivities of both years shows that labour as well as capital productivity show an improvement. This can mainly be explained by the increasing creation of value which again comes together with the increase in sales revenues. <?page no="75"?> 74 3 Berlin Balanced Scorecard Approach Via the expansion of the capital productivity with the average number of employees the labour productivity can be obtained again. This connection is made clear with the multiplicative connection of both indicators (cf. Haller, 1997, pp. 305). E.g. the increase of employee productivity can result from an increase of employment capital. 2010 = average capital average n employees x value creation av. capital empl. 19,385 109,140 = 53,115 109,140 19,385 53,115 0.18 = 0.49 x 0.36 Fig. 22: Capital and labour productivity 2010 Based on Coenenberg, 2005, p. 1115. 2009 = average capital average n employees x value creation av. capital empl. 12,399 104,770 = 46,042 104,7790 12,399 46,042 0.12 = 0.44 x 0.27 Fig. 23: Capital and labour productivity 2009 Based on Coenenberg, 2005, p. 1115. Value creation rates are part of business performance analyses and therefore connected with the profitability analysis (cf. Coenenberg, 2005, p. 1117). This relation can be explained by the fact that profitability ratios always represent a quotient of input and output. The output is the good or service received by the customer for a certain price. Therefore, productivity is the pre-tax figure of company success, i.e. the company yield and shows potentials which can serve as competitive advantage (cf. Haller, 1997, pp. 315). <?page no="76"?> 3.2 Application of the Berlin Balanced Scorecard Approach 75 Haller presents different studies in his work on value creation (Haller, 1997). According to him an increase of labour productivity is in alignment with the company success (cf. Haller, 1997, p. 313). Both productivity indicators can depict the potential and employee perspective on the one hand and on the other connect profitability with the financial perspective with the help of the ROI. Fig. 24: Connection between profitability and productivity Based on Haller 1997, p. 305 and Schmeisser/ Clausen, 2009, p. 116. The above theoretical scheme is now filled out with the calculated indices, to make clear how the indicators are connected with each other. Fig. 25: Connection between profitability and productivity 2010 <?page no="77"?> 76 3 Berlin Balanced Scorecard Approach The calculation scheme contains all key indicators, which were identified in the different perspectives in order to provide individual information. Fig. 26: Illustration of the connection with the help of the ROI tree of 2010 Fig. 27: Connection between profitability and productivity 2009 Now parts of the annual financial statement (BASF group report 2010) are presented. They are the basis for the determination of key indicators and performance measurement systems. <?page no="78"?> 3.2 Application of the Berlin Balanced Scorecard Approach 77 A Annnneexx 11: : AAnnnnuuaall FFiinnaanncciiaall SSttaatteemmeenntt ooff BBAASSFF Assets (million €) 2010 2009 Intangible assets 12.245 10.449 Property, plant and equipment 17.241 16.285 Investments accounted for using the equity method 1.328 1.340 Other financial assets 1.953 1.619 Deferred tax assets 1.112 1.042 Other receivables and other long-term assets 653 946 Long-term assets 34.532 31.681 Inventories 8.688 6.776 Accounts receivable, trade 10.167 7.738 Other receivables and miscellaneous shortterm assets 3.883 3.223 Marketable securities 16 15 Cash and cash equivalents 1.493 1.835 Assets of disposal groups 614 - Short-term assets 24.861 19.587 Total assets 59.393 51.268 AAnnnneexx 22: : o oppeerraattiinngg s sttaatteemmeenntt Stockholders’ equity and liabilities (million €) 2010 2009 Subscribed capital 1.176 1.176 Capital surplus 3.216 3.229 Retained earnings 15.817 12.916 Other comprehensive income 1.195 156 Equity of shareholders of BASF SE 21.404 17.477 Minority interests 1.253 1.132 Stockholders’ equity 22.657 18.609 Provisions for pensions and similar obligations 2.778 2.255 Other provisions 3.352 3.289 <?page no="79"?> 78 3 Berlin Balanced Scorecard Approach Deferred tax liabilities 2.467 2.093 Financial indebtedness 11.670 12.444 Other long-term liabilities 901 898 Long-term liabilities 21.168 20.979 Accounts payable, trade 4.738 2.786 Provisions 3.324 3.276 Tax liabilities 1.140 1.003 Financial indebtedness 3.369 2.375 Other short-term liabilities 2.802 2.240 Liabilities of disposal groups 195 - Short-term liabilities 15.568 11.680 Total stockholders’ equity and liabilities 59.393 51.268 AAnnnneexx 33: : C Coon ns soolliiddaat teedd S Sttaatteemme ennttss ooff IInnccoommee ( (m mi illlliioonn € €)) 2010 2009 Sales 63.873 50.693 Cost of sales 45.310 36.682 Gross profit on sales 18.563 14.011 Selling expenses 6.700 5.667 General and administrative expenses 1.138 1.133 Research expenses 1.492 1.398 Other operating income 1.140 1.189 Other operating expenses 2.612 3.325 Income from operations 7.761 3.677 Income from companies accounted for using the equity method 201 61 Other income from participations 137 112 <?page no="80"?> 3.2 Application of the Berlin Balanced Scorecard Approach 79 Other expenses from participations 39 40 Interest income 150 134 Interest expense 773 734 Other financial result (64) (131) Financial result (388) (598) Income before taxes and minority interests 7.373 3.079 Income taxes 2.299 1.424 Income before minority interests 5.074 1.655 Minority interests 517 245 Net income 4.557 1.410 Earnings per share (€) Undiluted 4,96 1,54 Diluted 4,96 1,54 AAn nnneexx 44: : BBAASSF F GGrro ouupp ppeerrs soonnnneell eexxppeennsseess 22001100 ((mmiilllliioonn €€)) 2010 2009 Change in % Wages and salaries 6.731 5.942 13,3 Social security contributions and expenses for pensions and assistance 1.497 1.165 28,5 Thereof for pension benefits 408 178 129,2 Personnel expenses 8.228 7.107 15,8 <?page no="81"?> 80 3 Berlin Balanced Scorecard Approach AAnnnneex x 55: : CCoommppeen nssaattiioonn ooff tthhee SSuuppeerrvviissoorryy BBo oaarrdd mmeemmbbeer rss Thousand € Total compensation 2010 2009 Dr. h.c. Eggert Voscherau, Chairman of the Supervisory Board 475,0 152,2 Prof. Dr. Jürgen Strube, Chairman of the Supervisory Board - 67,6 Michael Diekmann, Vice Chairman of the Supervisory Board 282,5 116,2 Robert Oswald, Vice Chairman of the Supervisory Board 282,5 119,3 Ralf-Gerd Bastian 205,0 96,2 Wolfgang Daniel 180,0 71,2 Prof. Dr. François Diederich 180,0 71,2 Franz Fehrenbach 205,0 96,2 Stephen K. Green (from April 30, 2009 until Dec. 16, 2010) 180,0 53,4 Dr. Tessen von Heydebreck - 27,9 Max Dietrich Kley 230,0 121,2 Anke Schäferkordt 15,0 - Denise Schellemans 180,0 71,2 Ralf Sikorski 180,0 71,2 Michael Vassiliadis 217,5 108,7 Total: 2.812,5 1.243,7 <?page no="82"?> 3.2 Application of the Berlin Balanced Scorecard Approach 81 A Annnneexx 66: : EEmmppllooyyeeees s aanndd ssoocciieettyy 2010 2009 Change in % Employees as of December 31 109,140 104.779 4,2 Apprentices/ trainees as of December 31 2,442 2.401 1,7 Personnel expenses million € 8.228 7.107 15,8 Donations and sponsoring million € 49,8 48,1 3,5 Annual bonus % of Group companies 92,9 74,9 18,0 Lost time injury rate per million working hours 2,0 1,8 11,1 Occupational diseases per million working hours 0,5 0,4 25,0 LLi itteerraat tuurree This chapter is based on: Schmeisser, Wilhelm; Andresen, Maike; Kaiser, Stephan (2013): Personalmanagement. UTB basics, Constance/ Munich (chapter 3.1). Related Literature: Baetge, Jörg; Kirsch, Hans-Jürgen; Thiele, Stefan (2004): Bilanzanalyse. Düsseldorf. Krause, Hans-Ulrich; Arora, Dayanand (2008): Controlling-Kennzahlen. Key Performance Indicators. Munich. Schmeisser, W.; Hannemann, G.; Krimphove, D.; Toebe, T.; Zündorf, H. (2012): Finanzierung und Investition. Munich (chapter 3 and 4). Schmeisser, Wilhelm (2008): Finanzorientierte Personalwirtschaft. Munich. <?page no="83"?> 82 3 Berlin Balanced Scorecard Approach Schmeisser, Wilhelm; Clausen, Lydia (2009): Controlling und Berliner Balanced Scorecard Ansatz. Munich (Read chapter I and II) Schmeisser, Wilhelm; Krimphove, Dieter (2010): Internationale Personalwirtschaft und Internationales Arbeitsrecht. Munich (Read pp. 167 - 218) Volkart, Rudolf (2008): Corporate Finance, Grundlagen von Finanzierung und Investition. 4th ed., Zurich. Wöhe, Günter; Döring, Ulrich (2008): Einführung in die Allgemeine Betriebswirtschaftslehre. 23rd ed., Munich. <?page no="84"?> 44 BBaassiicc ccoonnssiiddeerraattiioonnss oonn oorrggaanniizzaattiioonnaall ccoonncceeppttss 44..11 TTooyyoottaa’’ss JJuusstt--iinn--TTiimme e: : aann oorrggaanniizzaattiioonnaall ssuucccceessss ssttoorryy An historical overview on the Japanese automobile industry at least indicates that success models of process organization don’t appear from nowhere but have to be practically and theoretically developed. Example: In 1933 Toyota and Nissan were founded during a funding phase of the Ministry of Commerce and Industry (MCI). Only in 1949 the American occupying power in Japan allowed the production of cars again. In 1952 the Ministry of International Trade and Industry (MITI) as successor of the MCI established its policy of protectionism and technology transfer for the Japanese automobile industry, which served as protection from American and European competition. As it was prohibited to found foreign companies in Japan after 1946 and foreign companies were only allowed to invest up to 20%, Japan was not an interesting target country for foreign investments. Therefore licensing to Japanese automobile producers was the only way to conquer the Japanese market with European and American automobiles. Between 1952 and 1953 four Japanese automobile producers were able to find foreign producers who licenced some car makes. Nissan’s licence agreement was designed in such a way that Nissan firstly received all pieces necessary to produce a car from Austin in Europe. From the second year of the agreement on, Nissan was capable to gain providers in Japan, in order to produce the Austin 40 on its own. To achieve this aim the Nissan employees were intensively trained and advised by the Austin engineers. Already at the end of 1955 Nissan achieved the aim that 100% of all pieces were produced in Japan. From the necessity to be obliged to obtain components from other countries <?page no="85"?> 84 4 Basic considerations on organizational concepts and later on from a large automotive supply industry arose the revolutionary, organizational “just-in-time-system”. I.e. when cars are ordered and sold and only as many pieces are ordered and received as needed for the present production of the cars ordered, this process is called “just-in-time process”. In order to underline just some business-management side effects, it should be pointed out, that the Japanese car manufacturers therefore needed no land or promises for purchase and logistics, no storage for the single pieces of the car to be mounted, no storage personnel or administration. This saved a lot of capital and costs. Toyota and Nissan were the first Japanese car manufacturers to try to develop and export own (innovative) cars. At that point in time both manufacturers believed that their small, simple Japanese cars were no match to the European and especially American competitors. When European small cars as the VW beetle achieved long-term export successes on the American market, also Toyota and Nissan considered exportation of small cars to the US. Toyota faced several problems at that time: a) how does a competitive car look like that could compete with e.g. the VW beetle and would adapt to the American market. The success of the VW beetle could be attributed to several factors? It was well constructed and manufactured and had low gas consumption and a low sales price. Therefore, it fulfilled the needs of many Americans in the 1950s and 1960s, namely of a more economic car as the American ones. However, the decisive success factor of the VW beetle in the US was that Volkswagen recognized the necessity of high service quality at an early stage and built up a comprehensive network of garages with reliable customer service. This way, VW could respond to the image and prejudice that foreign cars would generally cause high maintenance costs and spare parts were hard to obtain. Nissan and Toyota found out that the penetration rate of foreign cars was highest in the Pacific and Atlantic coast of the US, which was convenient for them. Furthermore foreign car makes benefited from the fact that car sellers in the US were not restricted to sell for a certain car manufacturer and that the US had no protectionism against foreign car manufacturers. Toyota and Nissan took the VW beetle as model and fixed the biggest weaknesses of the VW beetle <?page no="86"?> 4.1 Toyota’s just-in-time succes story 85 with their cars. The American customers desired a bigger motor in order to be able to manage large distances in the US with more ease as well as a better interior design. The Toyota Corona, which was introduced in 1965, was especially produced for the American market with some interior design extras, which could not be found in other imported small cars. The car seats for example were softly cushioned, the flooring of the cars was covered with carpet and they had tinted screens. Furthermore the motor of the Corona was with 90 hp twice as powerful as the one of its direct competitor - the VW beetle. When the Corona was launched it was the only imported small car in the US with automatic transmission. With innovative cars like the Corona and the Corolla (1967) Toyota laid the cornerstone of its worldwide fame and for its future pole position on the world market. Until 1967 Toyota and Nissan managed to adapt the prices of their small cars to the level of comparable European cars. In 1967 the Toyota Corolla was offered for 1374 USD, whereas the VW beetle was sold for 1375 USD. Nissan’s Datsun 310 was with 1339 USD even cheaper than the comparable Austin Mini Deluxe which was sold for 1375. Regarding the retail of their cars it was advantageous for Toyota and Nissan that American car manufacturers were not allowed to oblige licensed dealers to exclusively sell their makes. In order to conquer the US car market Japanese car manufacturers offered profit margins between 18% and 20% of the final retail price as compared to margins between 12% and 13% offered by Ford, General Motors and Chrysler. Toyota was the first automobile importer in the US which used TV spots for its makes. 1971 Toyota had the biggest advertising market share of TV advertising amongst all automobile companies in the US. b) How was Toyota able to achieve this success, when in 1960 only a total of 165000 cars per year were produced in Japan, while in the same year 6.6 million cars were sold in the US? This is what the Japanese car manufacturers take as starting point for the organization and quality assurance in the production and purchase logistics. In comparison to Japan the US were motorised very early in the 1910s and 1920s. This was possible with the process organization <?page no="87"?> 86 4 Basic considerations on organizational concepts and of the technical success model of the assembly line by Tayor/ Ford in the automobile sector. 1914 Ford transferred the workmanship of individual production of automobiles into a process-oriented assembly line production under conditions of scientific business management in accordance with Taylor. With the innovative, Tayloristic production method with the assembly line it was possible to produce small cars of simple construction cost-efficiently in mass production. With the help of mass production it was possible to specialise personnel and to decrease staff costs. The personnel costs decreased with the increase of productivity through learning and practice on the work site and through the joint production organization. With the help of Taylorism exact working times per employee, organizational unit and work site could be determined and material consumption rates could be calculated and therefore planning costs for the construction of a car could be determined and controlled. In modern terms: Ford 1914 and Toyota 1967 have practiced and successfully implemented cost leadership in accordance with Porter (1982) via putting the experience curve (Henderson, 1972) into practice. Also the Japanese car industry has tried from the start to materialize the Law of Mass Production, in order to decrease fixed costs. Ford had first achieved this through the model T with the help of the assembly line and the sale of cars in the United States. Toyota and Nissan counted on an aggressive exportation to the US, Asia and later to Europe, in order to achieve high production quantities. Toyota and Nissan knew the success story of Ford’s and Taylor’s assembly line in 1914. Via the innovative process organization and through the experience curve Ford could decrease the price of the model T from 850 USD to 450 USD and by 1926 even to 310 USD. Through the implicit strategy of cost leadership the model T as mass car was affordable for the first time also for middle class customers. This amplified the car market and its growth opportunities enormously. The production of the VW beetle and the production of the Corolla took over the Ford’s and Taylor’s organizational success model. The reason why Toyota became even more successful than Ford and VW, could be ascribed to its innovative product policy and its Just-in-Time concept with the new controlling instruments, like <?page no="88"?> 4.1 Toyota’s just-in-time succes story 87 target costing and process cost calculation, which helped to have a better economic control over the process organization. Moreover, the Japanese car industry perfected its retail organization for their exports. Between 1978 and 1985 European and American theorists tried to explain the success of the Japanese car industry with the Japanese mentality and company culture. They realized much later that the Japanese had translated the American literature on quality assurance but also Kosiols book on organization regarding organizational and operational structure, in order to perfect the logistical Just-in-Time concepts and Lean-Management concept for the operational structure. Furthermore, they introduced an examination of strategy implementation in the analysis of operational structure in connection with cost accountancy, in order to continually achieve productivity improvements. The Japanese mentality and company culture has supported the structural change only in a psychological way, this however does not explain the economic success. This can be proved via a fictitious return-on-investment calculation in the example below. which shows the connection between accountancy, cost centres, organizational units and cost object accounting. <?page no="89"?> 88 4 Basic considerations on organizational concepts Fig. 28: Connection between accounting, organizational units and cost object accounting <?page no="90"?> 44..22 OOrrggaanniizzaattiioonnaall TTaarrggeettss: : nnoo ppeerrffoorrmma annccee mme eaassuurreemme enntt wwiitthhoouutt ttaarrggeettss There are several answers to the question as to why companies have a certain form of organization, i.e. a form of structural and process-oriented organization, which imply implicit organizational goals: [1] The company is an organization. The company is for example an incorporated company which has to be registered with the commercial register. Internally as well as externally it acts as legal person, being represented by the chairman of the board when interacting with banks, fiscal authorities, trade unions, labour courts, supplier and customers. This is the institutional organizational terminology . In this case the organizational aim is a legal aim, namely enabling the company to take legal action. Internally an incorporated company needs a managing board, a supervisory board and has to organize a shareholders’ meeting once a year. A work council and a women’s representative have to be elected etc. [2] The company has an organization. If the company has an organization and is managed by a board as organ of e.g. an incorporated company. The managing board then uses an organization in order to be able to manage the company successfully with regard to operative and strategic challenges. This is the instrumental organizational terminology. The organization helps the managing board to implement the goals and strategies bearing in mind the aim of value creation. Therefore a primary organization (structural organization) e.g. via functional organization, business area organization or matrix organization and a secondary organization (process organization), e.g. product-oriented, process-oriented or customer-oriented process organization needs to be effected. <?page no="91"?> 90 4 Basic considerations on organizational concepts Some examples for the improvement of company management could be as follows: Implementing a strategy of a business area (product, product range etc.) in a value-creation-oriented primary and secondary organization (cf. Porter Approach) in order to guarantee its profitability (ROI; EBIT, EVA, Berlin Balanced Scorecard etc.) and in order to analyse it with the help of accountancy and controlling. Jobs and cost centres are created in parallel in the structural/ primary organization. On the one hand the holders of the position can be made responsible for the resulting costs and revenues. On the other hand, it can be examines with the help of full costing and direct costing, whether the actual costs correspond to the target costs. The deviation analysis is a starting point in order to start organizational change e.g. based on behavioural science (change management). In order to remain competitive, industrial organizations try permanently to implement new products in a more or less flexible organization with the help of innovation management. Approaches of the process organization/ secondary organization are for example Lean Management, organizational suggestion schemes and quality management, which try to increase company productivity by 5% per year. This means for the company management, that with the same production staff 5% more sales have to be effected or the rationalisation leads to staff reductions. Especially these organizational targets are not popular with employees, the work council and trade unions. For the secondary organization/ process organization there is also proof of the connection of accountancy and organization with regard to rationalisation and lean management. Target costing with process cost calculation or direct costing are concepts for the measurement or productivity and efficiency of individual processes and the overall process organization and permit to analyse them constantly with the help of controlling and to question the current organization. The structural organization also serves to incorporate the consultation rights and co-determination rights of the work council in committees for the target setting and enforcement of the <?page no="92"?> 4.3 Organizational Targets 91 board. Otherwise, the instruction right prevails, which is easier to implement in a hierarchic organizational structure. [3] The organization is being organized (activity-oriented organization terminology). The target of the activity-oriented organization is to make the workplace or the production more efficient in the sense of Lean Management. Organizational targets are for example the organization of the workplace in such a way that it corresponds to the workplace requirements and job security of the employee. The employee of the position may make suggestions on the organization of the workplace, which leads to more motivation and loyalty to the company. But also via quality management (Quality Circles, Kaizen) and a company suggestion scheme productivity improvements are supposed to be achieved and suggestions for improvement to be implemented. This way the efficiency and profitability of the Working Capital in the current assets are meant to be improved. 44..33 OOnn tthhee nneec cees sssiit tyy o off o orrggaanniiz zaattiio onnaall c coonncceep pttss Especially the instrumental organizational concept of primary and secondary organization is coined by interdisciplinary perspectives on organization. This is due to the fact that academics have been examining the organization phenomenon for decades or even centuries. They pursue and study different organizational goals and therefore underline different perceptions on causal connections with regard to organization (quasi-theories), which again can serve as basis for the organizational conception. The necessary precondition of each instrumental organizational concept is the structural approach, which means that the managing board has to take decisions on the structural/ primary organization. The focus of this concept lies on the execution of task and the supply of information via the company. On the basis of the primary organization also the decisions on the secondary organization/ process organization are taken. The structural approach sets the purposeful and technically reasonable option <?page no="93"?> 92 4 Basic considerations on organizational concepts for the primary and secondary organization. Without the structural approach there is no instrumental organization and progressive management for the company. Sufficient condition(s): with the structural organizational approach, further organizational theories can be considered individually or additionally. The first concepts to be taken into account are the psychological-behaviour-science based organizational approach and the human oriented organizational approach. Employees want to be psychologically supported in case of reorganization of the company for innovations and in the context of Lean-Management. Otherwise, enormous resistance can occur. Becker and Laburcay (2012, p. 2) show this in their definition on organizational development: Organizational development is a holistic, management driven process of design and change of organizational units and organizations. It contains all measures of direct and indirect target oriented influence on structures, processes, persons and relations, which are planned, implemented and evaluated (via organizational controlling) by the organization (i.e. the management/ managing board). Therefore, the structural approach is linked to organizational change, reorganization and the structural organizational development in the primary and secondary organization. The structural organizational development can be and has to be supported by a labour psychological, behavioural organizational development, as it is postulated by Becker for personnel development and Labucay in organizational development. The labour psychological behavioural science-based organizational development is supported by the company culture, which can be considered a special case of behavioural science based organizational development and change management. It is also supported by symbolic interactionism, in order to solve intercultural problems in international companies. Also in this book the symbolic, company cultural organizational approach is analytically and conceptually covered as own organizational approach with own models (cf. Schmeisser/ Kirchhoff 2013). <?page no="94"?> 4.3 Organizational Targets 93 The last concept which is discussed and analysed in this book as supplement to the structural approach is the legal-political concept, which can be subsumed under the institutional as well as instrumental term of organization. According to Nitschke, (2012, p. 10), politics and law can connect and identify the following ideas on the organizational phenomenon: [1] In the sense of an institutional understanding of organization: A public law organization which can be connected with the corporate governance approach, i.e. legal status, shareholders’ meetings, general assembly, advisory board, managing board, work council, proportion of women, shareholdervalue oriented remuneration management with stock option programs etc. A regime for everybody which is created with the help of rules in an organizational book, referring to labour law, social law etc., e.g. on the protective clothing, breaks, vacation, engagement, filling in vacancies or company agreements on old age pensions. Representation of the company by the management (managing board) in relation with customers, suppliers, banks, shareholders, employees, fiscal authorities, social security authorities in order to be able to take legal actions. A more democratic or monarchic constitution in order to be able to determine the targets of the company and to implement them with or without executive rights. The question on ethic principles for target determination in order to foster the welfare of the organization and the wellbeing in the life of people/ employees. The “government actions” in or by the organization constitute the company politics or company management. [2] In the sense of an instrumental understanding of organization: In the classic concepts of primary organization questions on leadership and power are clarified and legitimized via the law. Those who have the money are in authority and determine the corresponding legal status to secure the leadership and to control the company politics. <?page no="95"?> 94 4 Basic considerations on organizational concepts Nonetheless, the target setting and implementation can become a matter of power of external and internal satellite groups or stakeholders. In determined companies the question arises in the context of the company constitution as to how the different interest groups are represented in the organization, via legal regulations or via power games or persuasion via the communication approach of the Harvard Concept. Conflict management and mediation as instrument of conflict solving and communication in the context of conciliation institutions receive their own significance on this basis. There are also political challenges for the companies, which shall guarantee and healthy, successful and good life to each member of the company organization (cf. business ethics, ethics. 44..44 OOrrggaanniiz zaattiio onnaall c coonncceep pttss a anndd a assssuum mppttiio onnss Figure 29 gives an in overview on the organizational approaches. Fig. 29: Multi-context organizational theories <?page no="96"?> 4.4 Organizational Targets 95 44..44..11 OOnn tth hee s sttr ruuccttuurraal l aap ppprrooaac chh: : mmeet taap phhoorr -- oorrgga anniizzaat ti ioonn a ass ““mmaacchhiinnee” ” The classic, structural approach on organizational theory by Taylor, Fayol, Max Weber, Nordshieck, Kosiol, Dale, Drucker etc. all contain the following organizational targets: Expediency Productivity in relation to the technology in use Economic efficiency and profitability, the Return on Investment in accordance with DuPont 1919. At least in the sense of Porter the modern, structural organizational approach requires cost leadership with the help of the learning curve and/ or a differentiation strategy per business unit in accordance with portfolio management and the organizational implementation of the target strategy with the product. The central challenge of the company management and of an organizer is the implementation of business units (segments, business units, branches, projects etc.) and the selection and implementation of a corresponding organizational form. The value creation chain as process organization is meant to guarantee the Return on Investment and the Shareholder Value. This is an approach, which is also suggested by the Berlin Balanced Scorecard Approach in order to measure performance (cf. Schmeisser/ Clausen). The assumptions of the “structural organization approach” are as follows: [1] Departing from an engineering and business informatics understanding, the organization is seen as machine or management information system of a computer. [2] The company organization is not influenced by the social, political, cultural and economic environment. [3] The business management targets limit the organization to a rational, quantitative purpose-means model of Max Weber’s (positive) bureaucracy model and ends up in a structural organization. Max Weber’s rational bureaucracy model would demand for a strategy implementation in the sense of a value creation chain, which can be <?page no="97"?> 96 4 Basic considerations on organizational concepts found in the Berlin Balanced Scorecard Model and a process organization. [4] Taylor postulates more or less implicitly a mechanistic, instrumental idea of man (homo oeconomicus). People are just a “cog” in the clockwork organization of the company. The employee motivation is oriented towards the homo oeconomicus or the shareholder value. [5] In the sense of Max Weber technology is considered to be a given, passive element or an active element, e.g. in project organization, which is coined by (technical) innovation and organizational change (cf. Burns and Stalker: The Management of Innovation, London 1961). [6] In accordance with Max Weber only the political top, i.e. the management has the right to determine company targets and therefore organizational targets, strategies and visions. All other organizational members are subordinates in the sense of the monarchic principle. [7] Given organizational targets and efficiency are in the focus of structural organizational conception via (organization) controlling and strategies, organization cultures and organization processes. [8] Organizational activities which are not contained in the value creation and do not serve the competitiveness of the company and do not increase the company value (shareholder value) may not be considered. 44..44..22 BBeeh haavviioouurraal l sscciieen nccee a anndd llaab boouurr oorrg gaan niizzaat ti ioonn bbaas seed d oorrggaan niizzaat ti ioonn ccoonncceep ptt What is meant is that companies are an instrument for the satisfaction of cognitive, emotional and social needs of organization members. The “rationality” of the natural science and engineering based on the machine model of the traditional management understanding on organization departed from the assumption that employees would adapt with their behaviour without problems to the formal <?page no="98"?> 4.4 Organizational Targets 97 structures and process, just like cods in a clockwork. Already with the introduction of the conveyer belt by Ford this assumption of the Taylorism falsified. The employees suffered from the monotony and psychological saturation and tried to escape from the labour conditions by means of absenteeism and fluctuation. Since the Hawthorne-studies this perception has been integrated in organizational theory and research. With Barnards (1938) stimuluscontribution theory, organizational issues are not only seen as coordination problems of the structural approach, but also as motivation problem of the behaviour science based organizational approach. It is assumed that an employee is only motivated to carry out an expected or defined work performance, if the organizer or the engineer of labour studies does not only determine the performance, but also the organizational contribution, the personnel management incentives, which have to correspond to the employee’s expectations. The organizational stimuli are the collective, labour law obligations of the agreed organizational and personnel management rules of the labour agreement and of the needs of the employee. It has to be assumed that the productivity of an employee increases, if the organizational member fits via labour division, specialisation and professionalization a certain organizational task, perceives it as interesting work and considers the salary, work place security and future career perspectives in the company as safe. It is no wonder that the labour psychology and behavioural science based organizational approach are seen as contrary to the structural approach on the one hand, and are seen as “mending institution”, i.e. as complementary approach to structural approach on the other hand, because it sees people as needing, social beings. Employees still want to be treated like human beings despite of technical needs and company structure. In the sense of Cyert, March and Simon (Cyert/ March 1963, Simon 1976 and Schanz 1978) the labour psychology and behavioural science based perspective of organization makes the following assumptions: <?page no="99"?> 98 4 Basic considerations on organizational concepts The approach chooses the “methodological individualism”, because higher behavioural science organization units, like groups, leadership or organization as social unit, can only be subject to a social-psychological examination as aggregation of individuals. This constitutes a methodological deficit of the behavioural science approach. Organizations exist in order to satisfy human needs and motivation and achieve contentment with work. Organization and employees need each other in the context of strategy implementation in structures and processes. If the collaboration between individual employees and/ or aggregated organization units and/ or of the overall organization is insufficient, one of them or both are affected. It is advantageous for both sides, if organization and individuals/ employees are well-adapted to each other. Conflicts are disruptive factors under behaviour science and have to be solved in a harmonic, psychological way. I.e. conflicts are undesired and have to be disclosed, discussed and settled with the help of coaching, mediation etc. (conflict management in the sense of the political organization approach is not desired). The behavioural science based organization approach focuses the individual behaviour of employees in the organization, group behaviour and/ or interactive group conduct in the organization, leadership behaviour in the organization, communicative, harmonic interaction in the organization and the behaviour of all employees in the organization, which is also known as behavioural science based organizational development. Organization problems in behavioural science arise when e.g. a motivational offensive on the individual level fails due to group pressure or group dynamic. The different aggregation levels individual, group, leadership conduct, communication network and <?page no="100"?> 4.4 Organizational Targets 99 organizational development of the behavioural science based organizational approach are in constant contradiction and are hard to direct in a labour psychological organization directive. Especially the situative approach a part perspective of the behavioural science based approach, empirically examines situation variables and their effect on the formal structure (cf. Kieser/ Walgenbach 2007). However, it can be doubted whether this analysis and empirical organizational research can be used in practice. On the one hand because the situation variables, especially the legal status, company targets, strategy and efficiency criteria are set by the company management. On the other hand it is not usual that the company purposefully directs its organizational conception and orientation on such situative organizational results of organizational research. Info: Often the organizational development is only driven via personnel development and motivational development. An example is the humanisation of the working life in Germany since the 1970s. It has become usual in companies to organize job enrichment, job enlargement and job rotation as well as partautonomous working groups instead of the classic conveyer belt work. Especially for the new forms of work organization the structural and behavioural science based organizational approach has started a narrow cooperation. 44..44..33 LLeeg gaal l--ppoolliitti iccaal l oorrggaanniizzaat ti ioonnaal l aap ppprro oaacchh: : ccoommppaan niiees s aas s ggoovveer rnnaan nccee i innsst trruummeen ntt a an ndd ppoolliitti iccaal l a ar reen naa ffoorr i inntteer re esstt g grroouuppss Organizational labour division and specialisation increases the wealth of nations and increases productivity in organizations, as Adam Smith reported already in his famous pin production experiment of 1776. He also brings up the question whether with the upcoming manufacturing production more exchange and coordination processes have to be implemented in companies instead of relying on markets. Also the question comes up as to when a free market is neces- <?page no="101"?> 100 4 Basic considerations on organizational concepts sary for the exchange and coordination, and when a company needs an organizational structure in order to regulate the coordination process internally via its process organization. Industrialisation and mass production have resulted in assembly line work and largescale enterprises like Ford, Siemens, Toyota and other companies in the sense of a structural organizational approach. An interim explanation is that labour division and specialisation of production processes are easier to achieve in companies than on markets, in order to create productivity advantages. However, stipulations of the neo-institutional approach coined by national economics are maintained. Furthermore, the legal institution and the power maintaining measures are in foreground of this approach. Info: at the beginning of the 1990 economic organizational approaches were developed, e.g. by Picot et al. The basis was provided by microeconomics, where corporative actors were understood as rationally acting individuals who dispose over complete and safe information on the market. The actors pursue the target of profit maximization as producers. The organization helps them to gain power and defend themselves against competitors. The neo-institutional organizational approaches start with the assumption of partially rational actors, who dispose over limited knowledge, limited capacity to process information and a limited morality. In order to solve the coordination, moral and motivation problems, legal institutions, namely laws and organizational regulations are implemented. It is essential to create a juristic framework (institutions) for business regulation framework, i.e. for the management and control of the company. The spectre of legal institutions is here exemplified for an incorporated company. Info: the legislation determines the legal framework of the institutional company organization with the help of laws like the Civil Code, the Commercial Code, the Corporation Law, the Works Council Constitution Act, the Co-determination Law or the Labour Agreement Law, to name the most relevant examples. In Max Weber’s (1920) understanding, the legal framework <?page no="102"?> 4.4 Organizational Targets 101 legitimizes the executive rights of the top management organs. The managing board can for example in the sense of a limited “monarchic power” determine the strategy and implement it into a corresponding process organization/ structure of the company. With the organizational and personnel separation of the strategic decision-making on the one hand, e.g. of strategic management, strategy setting, e.g. of business units/ segments, a conflict-oriented coordination process develops on the other hand with operative management organization levels, bargaining partners and controlling. Info: Machiavelli, Max Weber (1920), French and Raven (1959) and Fisher and Ury (Harvard model of communication) have examined how power could by secured with the help of power poles in the organization. In contrast to the psychology, behavioural science oriented organization approach, the starting point is an interest oriented coalition model. Conflicts between internal and external coalitions and interest groups, like employers and employees are not putting organizational harmony at risk, but are understood as an absolutely normal organizational phenomenon and therefore as human right, which is reflected in the legal institution of collective contracts, in the constitution and the right to collective agreements. The legal-political organizational approach begins with a company, which has to be part of a legal and institutional company framework. This legal-institutional framework has to be supported and complemented with further legal institutions like the Works Council Constitution Act, the Co-Determination Act, and a compliance management system, in order to create a “good” Corporate Governance-leadership in the organizational structure of the company. Hence it shall be guaranteed that the executive rights of the board of directors are protected, and that on the other hand the codetermination possibilities of interest groups in the company decision-making are taken into account. The classic “monarchic principle” of legal protection of power via the structural organization is made democratic with the co-determination rights of the interest groups. <?page no="103"?> 102 4 Basic considerations on organizational concepts With the legal, conflict-oriented organizational approach the organization is defined as political arena of target and strategy setting. There are for example negotiations on the allocation of budget to the areas, segments and departments, on jobs and the distribution of company profits to the different interest groups. Company constitution, conflict management with the help of power utilization and interest conflicts via communication are underlined in this organizational approach. The legal-political organizational approach makes the following assumptions: Company strategy decisions are always related to the allocation of scarce company resources A company is an organization, which can be considered as coalition construction. Coalitions are formed with internal (managing board, advisory board, works council, functional areas etc.) and external interest groups (banks, trade union, state). Coalitions/ interest groups are individuals and/ or groups. Coalitions pursue different goals and strategies in dependence on personal values, norms and attitudes. Company goals and therefore organizational goals and strategic decisions result from the interaction of these coalitions, via constant bargaining, negotiating, threatening and competing for power positions in the organization. Due to scarce resources power games and conflictoriented discussions with regard to strategy setting and implementation are the rule in business organizations. Conflicts between coalitions are normal and should not be solved in psychological harmony. The political creation of an institution - a contract, e.g. corporate constitution, organizational directives, company agreements, labour contracts etc. are timely limited solutions of conflicts. <?page no="104"?> 4.4 Organizational Targets 103 44..44..44 OOnn tth hee vviissiioonnaar ryy, , ssy ym mbboolliicc ccuullttu urraal l oorrggaanniizza a- tti ioonnaal l aap ppprrooaacchh Here: organization as theatre of visions and myths. The success secret of innovative companies is for example the Lean-Management System in Toyotas process organization. Info: For more than 30 years there have been attempts in international management to detect the success secret of creative products with the help of the company culture. Among the most important works on company culture are “In Search of Excellence” by Peters/ Waterman, the “Theory Z” by Ouchi (1982), “The Art of Japanese Management” by Pascale and Athos (1982) and “Corporate Cultures” by Deal and Kennedy (1982). Schein (1984) however, is the source and trigger of the company culture debate. Schein’s “Three Levels of Organizational Culture” presents first insights into how an organizational culture analysis can be undertaken and how the corresponding company culture should be created. Especially in case of company mergers on a national or international level, this is a constant issue, e.g. in the case of technology companies that have to conduct permanent innovation management. In this case change management, i.e. the permanent structural and process-related changes in the organization are caused by technological innovation and represent a perpetual challenge. The innovative strategy development is compared to the metaphor of acting, because the organization coalitions, the company staff and the trade union have to commit to a symbolic leadership, to cooperation and readiness for change. Example: new visions, like the iPad presentation by Steve Jobs for Apple in 2011 are not only good innovation marketing, but also represent new screenplays for employees in organizational units, in order to prepare them with masquerades and new stage design for Apple’s new company organization. Innovative company culture permits the conflict-free implementation of new structures and processes into the organization. The creation and change of company culture also means the creation of another structural and process-related organization for new <?page no="105"?> 104 4 Basic considerations on organizational concepts products, which changes the work place of every employee. Personnel development is becoming organizational development with the help of a changed company culture. The symbolic organizational approach makes the following assumptions: Not the (marketing) event is important, e.g. the introduction of the iPad by Steve Jobs, with a company mission, vision and strategy, but its significance for the company organization. The events or the strategy gain only significance on the basis of the interpretation by the employees (with the introduction of the iPad as result of research and development by Apply, also the organization of production and marketing with Apple is changed, in order permit an improvement of mass production of the iPad and to sell it). Most visions, targets and strategies of an organization cannot be explicitly interpreted by the management or the staff. The symbolic organizational approach and symbolic leadership wants to evade the uniqueness, in order to draft the conflict oriented organizational change with less controversy with the interest groups, e.g. concerning the maintenance of jobs or the closure or preservation of production facilities. Versatility of strategies and aims fosters rational problem solutions, undermines political coalitions and / or facilitates innovations and their strategy implementation in an organization, in order to obtain a new structural concept of the company. Confronted with the uncertainty and ambiguity of job maintenance and production facility closure or preservation, members of an organization tend to develop symbols of solidarity and unity, in order to make company strategies easier to understand even if they might violate own interests in the coalition. <?page no="106"?> 4.4 Organizational Targets 105 In the sense of the Chandler Hypothesis “Structure follows Strategy”, a change of strategy implies organizational challenges, which can be solved with fewer conflicts with the help of a manipulated company culture. 44..44..55 CCo orrppoorraat tee oorrggaanniizzaat ti ioonnaal l t thheeo orryy aas s aap ppprrooaac chh ffoorr tthhee rreec cooggnniittiioonn" aan naal lyys siiss a an ndd ddees siiggnn rree-ggaar rddiinngg o orrggaanniizzaat tiioonnaall pprroobblleemmss A quote of Immanuel Kant with regard to the application of organizational theories could be: what can you know on organizational theories? And: what can you do in case of organizational problems? Info: Kant makes reference to Hume in theories and theoretical approaches, who examines the causality problem for the explanation of theories critically and in detail: In the human, conscious idea of a phenomenon, here organization, there is an intuitive causal connection, i.e. the idea that each (organizational) effect is necessarily connected to a cause. The critical question is how the interim, “correct” causal connection was obtained. Without discussing the logical, epistemic and empirical research problem in detail, for this book the decision was taken to solve the corporate organization problem with the help of four organizational approaches and their causal understanding, in order to provide help to companies with regard to organizational issues. As not all organizational approaches can be discussed in their totality, an academic “trick” is used, which the readers and business management students might know from national economics, namely the Ceteris-paribus clause. For each organizational problem one variable, in this case one organizational approach, is separately examined. The Latin ceteris paribus means under otherwise equal circumstances. Transferring this clauses to organizational concepts, it means that not all causes and effects can be observed, described, analysed, explained and conceived at the same time. In the theoretical examination of one organizational approach the others are automatically suppressed, even though in business reality they all exist at the same time. <?page no="107"?> 106 4 Basic considerations on organizational concepts With the organizational approaches at first axiomatic theory systems are created, which consist of an interim, inductively gained pre-understanding of the practitioner and/ or theorist of an organization. They have a certain point of view and perspective when observing, describing and explaining organizations. They develop a first technical basic terminology on organization as well as deduced terminology from their perspective or organizational approach. The formation rules of logic determine how the terms are defined. Terms are grouped, classified and systemised in expressions. A classic example in the context of the structural approach is the system of traditional organization theory by Kosiol (1961) as well as the Lean-Management-System/ Kanban-System as Toyota’s specific logistic system. The structural approach as “theory” consists of (quasi) laws, which are known as “organizational principles” in the organizational theory. In case of (quasi) laws, i.e. organizational principles, there are two logical classifications: Axioms or assumptions of the organizational approach, i.e. (quasi) laws which are not deduced from the organizational approach but fixed (e.g. the starting point of the structural approach is the tasks, today the information). Organizational principles of the organizational approach, i.e. (quasi) laws, theorems/ organizational principles which are deduced from the organizational approach (cf. traditional organization theory by Kosiol: from the task the analysis and synthesis of the structural organization and process organization are deduced). The deduction of organizational principles is regulated by deduction rules, which can afterwards be examined for “causality” on an empirical, i.e. inductive-statistical basis. Popper refers to falsification rules in this context (cf. Popper 1976). Organizational principles or hypotheses, e.g. the object principle in the configuration model of object organization or divisional organization, are subject to a causal relation of productivity, economic efficiency and profitability of the product programme of a company. The following figure presents the basic knowledge discovery process of a theoretical organizational approach, which can be especially controlled with the help of a hypothesis. <?page no="108"?> 4.5 Organizational Targets 107 Confirmed hypotheses and therefore theories, which show a causal connection between assumptions, organizational theories and effects, are appropriate for a purposeful business management structure of the organization and for a change management approach (organizational change, if the organization had not been efficient before). Fig. 30: Knowledge creation process of a theory or organizational approach 44..55 OOnn KKoossiiooll’’ss ttrraaddiittiioonnaall oorrggaanniizzaattiioonnaall tthheeoorryy … as starting point of a “multi-contextual organizational theory”: Kosiol (1961) adopted the concept of Nordsieck’s (1928) traditional organizational theory and developed organizational principles for the analysis and synthesis of the structural and process-related organization for business management and a mathematical-logical “closed” overall concept of organization. The traditional organizational theory chose the task as axiom. All other “multi-contextual” organizational approaches, like the politi- <?page no="109"?> 108 4 Basic considerations on organizational concepts cal-legal approach, the symbolic approach and the behavioural science-based psychological organizational approach can only be used complementary to the structural, traditional organization approach. Without structure and process of organization the other organizational approaches cannot be used. Kosiol assumes for the organizational considerations a free market that assigns a task from real economics to an industrial company. The market demands for cars for example. Thus, the production and sale of cars becomes the company task and therefore the quantitative organizational task. As modification and complement strategy has to be added to Kosiol’s organizational system, i.e. for example the cost leadership in the sense of Porter (1982) has to be integrated into the value creation chain. The strategic fulfilment of the task means a cheap production of cars, a strategy which Ford had intuitively chosen with the help of the assembly line. With extreme labour division and low qualification of employees with high job and work place occupation rates at the assembly line, a high level of productivity was meant to be achieved and personnel costs to be reduced in order to make economic profit with the sale of products. Organizers followed Taylor’s Scientific Management approach and introduced in all car companies a process organization with assembly lines as well as a functional management system (today matrix system) as process organization. The structural and process-related organizations were not only instruments in order to fulfil organizational demands. The structural organization also shows the hierarchical structure of jobs and positions and the process organization describes the work process, namely who cooperates with whom in which order of place and time, in order to solve the task and to produce and sell the car. The company task becomes the organizational task which needs to be solved purposefully, technically and economically with the structural and process-related organization of the company. The task (today the information in the information and communication technology) is the basic axiom and assumption of all structural organizational theories. <?page no="110"?> 4.5 On Kosiol’s traditional organizational theory 109 Fig. 31: Structural and process-related organization Besides the axiom “task” from which Kosiol develops the traditional organizational theory, his methodological procedure and his general performance-goals for the organization of an industrial company are underlined. Kosiol examines the overall task methodologically by dividing it into smaller part tasks until receiving the individual movements at a special work place. He then synthesizes purposefully smaller movements of a work execution to sub tasks of the overall company task or a bundle of tasks of a position, then of a department, a main department and then of a function or division. He follows the same procedure with regard to the process-related organization, where the work execution is analysed in order to combine it in a synthesis, e.g. in form of a machine work place, a workshop or a conveyer belt. <?page no="111"?> 110 4 Basic considerations on organizational concepts Fig. 32: Modified traditional organizational theory by Kosiol 1961 In accordance with Kosiol the task analysis and synthesis have to be undertaken in a purposeful way, which includes thinking about causal purposemeasure-relations and the contribution of each position to the overall task in the structural organization. the purposefulness has been directed by the technical requirements and possibilities, in order to develop meaningful, technically feasible organizational forms in the industrial company. The organization has to fulfil economic requirements, i.e. it has to be productive, efficient and profitable. <?page no="112"?> 4.5 On Kosiol’s traditional organizational theory 111 Fig. 33: Methodological procedure of the traditional organizations concept (cf. Schulte-Zurhausen 2010) Kosiol asks the question in accordance with which principles and norms the organization has to be analysed and synthesized. He names five organizational principles for the analysis and central synthesis. In a first step the overall task of the industrial enterprise is described, in order to carry out the quantitative and qualitative analysis in accordance with organizational principles. Kosiol names five organizational principles for the structural organization: [1] the execution [2] the object [3] the phase [4] the rank [5] the purposefulness for the analysis of the overall task and the synthesis <?page no="113"?> 112 4 Basic considerations on organizational concepts Execution (also function or “task”) Typical tasks in an industrial business are procurement, production and sales in the operational sphere. In the financial and administrative sphere accountancy, personnel management, organization and IT, general administration or supervision of buildings could be named as tasks. In the synthesis after the execution Kosiol obtains a primary organization of “functional organizational structure”. Object (for Kosiol objects are products, product ranges and divisions or business areas, countries, regions, continents etc.): A car manufacturer can analyse and synthesize the organization with respect to small, middle and big vehicles, trucks, busses, motocycles, sport cars, in Sp ain, Ge rm any, As ia, USA et c. W it h the h el p of th e object principle Kosiol receives a product organization (synonyms are division organization or business area organization etc.). However, Kosiol also suggests the combination of organizational principles, e.g. of the execution and object principle and therefore receives the primary organizational form of matrix organization. Phase (with the phase-organizational principle in the sense of Fayol, the management process is described by its management functions: target setting, planning, personnel management, organization and control): Cohesive large-scale tasks that have to be managed and performed are typical success models in the economy. With the analysis and synthesis in accordance with the phase principle Kosiol obtains the primary organizational form of project organization. Rank (the Rank describes the hierarchy of the structural organization): Kosiol follows Max Weber’s and Taylor’s idea that organizations “always” want to protect the monarchic principle of power maintenance of the entrepreneur via a legal right to give directions in the company. Purposefulness (Kosiol distinguishes a primary and a secondary purpose): The principle of purposefulness is based on several considera- <?page no="114"?> 4.5 On Kosiol’s traditional organizational theory 113 tions: a) the company has to be analysed and synthesized in its purpose-means-relation in such a way, that the organizational institutions can be used as cost centres in accountancy, e.g. in order to be able to attribute costs and performance, caused by such positions, departments, functions etc. to those institutions. Primary purposes of an industrial company are always fulfilled in the operational sphere, in procurement, production and sales. These spheres have to be given a productive and efficient organization, in order to create Return-on-Investment. Therefore, the product-related costs occur in these organizational units and the cost units have to be identified as potential turnoverand contribution margin units. In accordance with Kosiol secondary purposes arise always in the sphere of the finance-administration area. These areas are unproductive and reduce efficiency and decrease the contribution margin. Kosiol assumes that overhead costs and fixed costs occur in these spheres. For the process organization Kosiol suggests eight organizational principles for the work analysis and synthesis: These are the five organizational principles of structural organization: [1] Execution [2] Object [3] Phase [4] Rank and [5] Purpose Based on Scientific Management three further organizational principles are added: namely how tasks have to be executed with regard to [1] Time [2] Place and [3] Personnel <?page no="115"?> 114 4 Basic considerations on organizational concepts Time organization principle (key words could be working hours and transition to flexible working hours in the context of analysis and synthesis of the work): On the basis of Scientific Management the timely order of the individual work elements on the conveyer belt or in the Just-in- Time system are analysed and the order, as well as the corresponding duration is determined. Further aspects are shifts, starting and termination hours for jobs in accordance with working hour regulations etc. On this basis the timely, personnel and factual interdependences between the work elements are organized. Place organization principle The place organization principle analyses the work places, their distribution, attribution to processing stations, e.g. the assembly line production, in order to minimize the cycle time and transportation distances. It clarifies the ergonomic requirements of work places, of machine tools, of interior design and work place security etc. Personnel organization principle On the basis of organizational requirements with regard to the desired employee, who shall fulfil a certain profile, the task is assigned to a certain person. With this person the structural and process-related organization is connected with personnel management. 44..66 OOrrggaanniiz zaattiio onnaall a annaally yssiis s The trigger of an organizational analysis is for example communication problems in an international project, often due to emails language problems cultural misunderstandings. A further trigger of an organizational analysis is when the organizational change is not accepted by the employees because the existing attribution of resources could be put at risk. There might be additional fears that with the structural and process-related <?page no="116"?> 4.6 Organizational analysis 115 organizational change expert knowledge and competences in the fulfilment of a task could be endangered by the reorientation of the organization, that existing power relationships with employees, colleagues and leaderships are threatened, that group activities in project groups could lead to unwanted results. Those fears could lead to a reaction of structural idleness to the psychologically perceived “threats” and the undermining of the desired results of the company etc. In addition to the purely technical-structural “organizational change” due to an organizational analysis, the psychological political and cultural organizational problems have to be solved with the help of change management. In an organizational analysis different procedures can be selected in order to describe and explain organizational problems and in order to draw conclusions for the primary and secondary organization: a traditional organization theory by Kosiol related to task, technology, ergonomics and IT or the structural organizational approach an organization and labour psychological, political-conflict oriented and company culture based organizational analysis, e.g. by carrying out the “organizational change” with innovation, in order to introduce change management as support for the structural organizational change. An organizational analysis via empirical organizational and personnel research via questioning the potential and/ or current staff, in order to reach hypotheses (principles) e.g. on career planning of women, with the aim to render it possible to combine family, work and career in an organization. The organizational concept in the process organization could for this purpose render the working hours more flexible and/ or introduce a kindergarden into the company. Today it is possible to carry out an economical-financial organizational analysis with the help of selected instruments of organizational controlling in addition to the above organizational analyses. In the context of process organization activity-based cost- <?page no="117"?> 116 4 Basic considerations on organizational concepts ing and target costing could be employed, but also the Berlin Balanced Scorecard would be appropriate. It is also possible to examine procurement, production and sales processes with selected key figures or the working capital management approach. In this chapter, however, only the first possibility of organizational analysis in the sense of the traditional organizational theory will be explained. In accordance with Kosiol the organizer has to divide the overall task of the company analytically into organizational principles, in order to synthesize them later in accordance with purposeful organizational principles in organizational positions, departments, main departments, divisions, strategic business areas/ business units. First organizational errors occur immediately, namely when task, competence and responsibility needed for a certain position are not congruent with a certain employee. In practice employees also fulfil tasks, gain competences and take over responsibilities of other positions or try to, which again results in conflicts. Every organizational analysis or system analysis in the IT-area has the object to describe and detect weaknesses, to find possibilities for improvement for the organization and/ or IT-area, to evaluate them and to deduce recommendations for the organizational concept (cf. Lean-Management or Just-in-Time concept of the Japanese car industry). According to Acker (cf. Acker/ Weiskamp, 1977, pp. 11) the organizational analysis consists of three main phases: The examination and presentation of the organizational status quo (via checklists, questionnaires, inspection catalogues, multimoment procedures, job descriptions, organigrams etc.) The critical examination of weaknesses and mistakes in the structural and process-related organization (via interviews with the concerned persons, action charts, communication analyses etc.) <?page no="118"?> 4.6 Organizational analysis 117 The development, assessment and evaluation of alternative solutions for the structural and process-related organization via utility analyses, decision tree processes, target costing, activity based costing, investment calculations etc. There are two basic stages in the methodological process of organizational analysis: [1] Examination of the details of an organization for erroneous or meaningless conception [2] Comparison of several alternative solutions and decisions on the basis of special assessment procedure (organizational controlling (cf. Acker/ Weiskampf 1977, p. 39). Fig. 34: Organizational analysis of the problem of delegation of task, responsibility and competence with the potential conflicts in structural and process-related organization, which puts the cooperation of positions at risk <?page no="119"?> 118 4 Basic considerations on organizational concepts Fig. 35: On the problematic connection between task, responsibility and competence in the analysis of a position and position matching in the context of the organizational analysis <?page no="120"?> 4.6 Organizational analysis 119 Fig. 36: Methodological procedure of organizational analysis L Liitteerraattuurree This chapter is based on: Schmeisser, W.; Reiß, Michael; Rolf, A.; Popp, R. (2014): Organization. Konstanz: UVK-Verl.-Ges (UTB basics, 3976), chapter 2. Related Literature: Bea, F. X. / Göbel, E. (2010): Organization, 4th ed., UTB-Verlag, Munich, chapter 12: Traditionelle Organizationsmodelle, p. 359 - 392. Schmeisser, W. (1997): Internationale Strategien der japanischen Automobilindustrie zur Erschließung des amerikanischen Automobilmarktes bis 1992; in Clermont, A. / Schmeisser, W. (Ed.): Internationales Personalmanagement, Verlag Vahlen, Munich p. 165-194. Schmeisser, W./ Clausen, L. (2009): Controlling und Berliner Balanced Scorecard Ansatz, Oldenbourg Verlag, Munich. Schmeisser, W./ Andresen, M. / Kaiser, S. (2012): Personalmanagement, UTB basic, Munich, S. 12 ff. <?page no="122"?> LLiitteerraattuurree Alemann, v. Heine: Der Forschungsprozess. Eine Einführung in die Praxis der empirischen Sozialforschung. 2nd ed., Teubner, Stuttgart 1984 Backes-Gellner, Uschi / Lazear, Edward P. / Wolff, Birgitta: Personalökonomik. Schäffer-Poeschel Verlag, Stuttgart 2001 Barnard, C.I.: The Functions of the Executive. Harvard University Press, Cambridge 1938 Bartlett, Christopher A. / Ghoshal, Sumantra: Internationale Unternehmensführung. 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Verlag Vahlen, Munich 1997 Coase, R. H.: The Nature oft he Firm, in: Economica N.S., Vol. 4 (1937), p. 386-405 Coenenberg, Adolf G. / Salfeld, Rainer / Schultze, Wolfgang: Wertorientierte Unternehmensführung. 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Grundlagen und Anwendungen. Branchentreff der Berliner Wissenschaft und Industrie. Beuth Verlag, Berlin a.o. 2015, S. 233-244. Herfurth, Nadin / Schmeisser, Wilhelm: Familienfreundliche Personalpolitik. UVK-Verlag, Munich 2014 Kieser, A. / Kubicek, H.: Organisation, 3rd ed., deGruyter-Verlag, Berlin/ New York 1992 Kieser, A. / Walgenbach, P.: Organisation, 5th ed., Schäaeffer-Poeschel-Verlag, Stuttgart 2007 Kirsch, W. / Meffert, H Organisationstheorien und Betriebswirtschaftslehre. Gabler Verlag, Wiesbaden 1970 Kosiol, Erich: Leistungsgerechte Entlohnung. Gabler Verlag, 2nd ed., Wiesbaden 1962 Kosiol, Erich: Organisation der Unternehmung, 2nd ed., Gabler Verlag, Wiesbaden 1976 Kubicek, Herbert: Empirische Organisationsforschung, Poeschel-Verlag, Stuttgart 1974 March, J.G. / Simon, H. A.: Organizations. Wiley & Sons, New York 1958 <?page no="124"?> Literature 123 Picot, Arnold/ Dietl, Helmuth / Franck, Egon: Organisation. Eine ökonomische Perspektive. 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Oldenbourg-Verlag, Munich 2010 Schmeisser, Wilhelm u.a. (Ed.): Modelle zur Humankapitalbewertung im Vergleich zum Berliner Humankapitalbewertungsmodell. 2nd ed., Rainer Hampp Verlag, Mering and Munich 2011 Schmeisser, Wilhelm u.a.: Entgeltmanagement. utb-Verlag, Munich (to be published end of 2016) Schmeisser, Wilhelm / Andresen, Maike / Kaiser, Stefan: Personalmanagement. UTB basics, Munich 2012 Schmeisser, Wilhelm / Clausen, Lydia / Rebecca Popp / Ennemann, Carsten / Drewicke, Olaf: Controlling and Berlin Balanced Scorecard Approach. Oldenbourg Verlag, Munich 2011 Schmeisser, Wilhelm / Clausen, Lydia: Controlling und Berliner Balanced Scorecard. Oldenbourg Verlag, Munich 2009 Schmeisser, Wilhelm / Eckstein, Peter / Boche, Melanie: Die Finanzorientierte Personalwirtschaft auf dem empirischen Prüfstand. Eine webbasierte Befragung. Rainer Hampp Verlag. Munich and Mering 2009 <?page no="125"?> 124 Literature Schmeisser, Wilhelm / Eckstein, Peter / Hafner, Ralf / Hannemann, Gerfried / Stengel, Jörg K.: Wertorientiertes Finanzmanagement, UVK-Verlag, Munich 2015 Schmeisser, Wilhelm / Hannemann, G. / Krimphove D. / Toebe, M. / Zündorf, H.: Finanzierung und Investition. UTB basics, Munich 2012 Schmeisser, Wilhelm / Hofmann, Peter: Personalabbau bei sanierungsbedürftigen und insolventen Unternehmen: Interessenausgleich und Sozialplan als Lösungsmechanismen aus finanzwirtschaftlicher Perspektive. Rainer Hampp Verlag. Munich and Mering 2004 Schmeisser, Wilhelm / Höhne, Dora / Hutzler, Jan / Hanh Nguyen Tran: Wertorientierte Geschäftsmodelle, utb-Verlag 2015 Schmeisser, Wilhelm / Hummel, Thomas, R.: Globalkompetenz durch Länderstudien II. Rainer Hampp Verlag. Munich and Mering 2010 Schmeisser, Wilhelm / Kirchhoff, Kristin: Innovationsfördernde Unternehmenskulturen: Ein symbolischer Interaktionsansatz. In: Wilhelm Schmeisser: Wie Unternehmenskultur Innovationen fördert. UVK-Verlag, Munich 2014, S. 63-88 Schmeisser, Wilhelm / Krimphove, Dieter / Hentschel, Claudia / Hartmann, Matthias: Handbuch Innovationsmanagement. UVK- Verlag, Munich 2013 Schmeisser, Wilhelm / Krimphove, Dieter / Popp, Rebecca: International Human Resource Management and International Labour Law. A Human Resource Management Accounting Approach. Oldenbourg Verlag. Munich 2013 Schmeisser, Wilhelm / Krimphove, Dieter: Internationale Personalwirtschaft und Internationales Arbeitsrecht. Oldenbourg Verlag, Munich 2010 Schmeisser, Wilhelm / Mohnkopf, Herrmann / Hartmann, Matthias / Metze, Gerhard (Editors): Innovation Performance Accounting. Financing Decisions and Risk Assessment of Innovation Processes. Springer Verlag. Berlin 2010 Schmeisser, Wilhelm / Reiss, Michael / Rolf, Arno / Popp, Rebecca: Organisation. 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Verlag Mohr, Tübingen 1980 Williamson, O. E.: Die ökonomischen Institutionen des Kapitalismus. Unternehmen, Märkte, Kooperationen. Verlag Mohr, Tübingen 1990 Wolff, Birgitta/ Lazear, Edward P.: Einführung in die Personalökonomik. Schäffer-Poeschel Verlag, Stuttgart 2001 Zitawi, Mouna / Schmeisser, Wilhelm: Unternehmensführung in arabischen Ländern. UVK-Verlag, Munich 2014 <?page no="128"?> IInnddeexx activity-oriented organization terminology 91 behavioural science based organization approach 98 Berlin-Balanced-Scorecard- Approach 24 break-even point 69 calculation system 45 capital market-oriented approach 23 classification system 45 company-specific human capital 32, 35 Controlling 42 cost leadership 15, 17 customer perspective 52 direct personnel costs 25 external accounting 41 finance-oriented personnel management 20 financial perspective 52 Fordism 15 general human capital 35 human capital 33 indirect personnel costs 25 instrumental organizational terminology 89 internal accounting 41, 42 just-in-time process 84 key data 43, 45 labour economics 32 lag indicators 55 lead indicators 55 learning and growth perspective 53 legal-political concept 93 legal-political organizational approach 99, 101 liquidity 61 Net Working Capital 65 organizational approach 14 organizational development 92 organizational principles 106 performance measurement systems 45 personnel costs 25 <?page no="129"?> 128 Index primary organization 89 process perspective 53 profit contribution 61 ROI 46 scientific management 13, 14, 15, 17 secondary organization 90 situative approach 99 symbolic cultural organizational approach 103 symbolic, company cultural organizational approach 92 Taylorism 15 traditional organizational theory 107 value creation 71 weighted average cost of capital 64 Working Capital 64