Analysis case study

8

Integrating the Team-based Structure in the Business Process: The Case of Saab Training Systems

Tomas Müllern

This chapter describes the radical, company-wide, organizational change in Saab Training Systems from 1992 up until 1998. Saab Training Systems is a high-tech company working in the defence industry, and it is char- acterized as a prime mover in its industry when it comes to organizational renewal. The company is a fully owned part of the Saab group, but with a considerable degree of freedom. The Saab group is made up of a number of companies developing and producing both mil- itary and civil products. This case focuses on the change from a traditional functional structure to a team-based structure with a number of features relevant to the theme of this book: innovating forms of organ- izing. Following a strategy of concentration on core competence, the company, as a whole, is structured in a number of teams organized along business processes. The chapter is theoretically based on literature on team-based structures (and similar concepts) and the organization of business processes. It argues that the literature on new forms of organ- izing needs to focus more on team-based concepts and on how teams, projects or other small groups can be adapted to the business process. We have a fairly detailed knowledge of the transformation from functional to divisional, M-form structures (Chandler, 1962). The case of Saab Training Systems illustrates another form of radical transformation, from a

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functional principle of organizing to a process oriented structure organ- ized in a number of teams. Even though the case cannot function as a role model for company-wide change in bigger, and more complex organi- zations, it shows how radical change ideas can be implemented in small and medium-sized organizations, as well as in parts of bigger organizations.

The chapter has eight sections: next, a literature review introduces a number of important theoretical concepts to the case, followed by the methodology used. The case study is then presented, first with a focus on the industry and drivers for change, followed by a description of the company and its business philosophy. Following this, the organizational change is presented and analysed using concepts from the literature review. The change process is then analysed with a focus on aspects of learning and barriers to change. The chapter concludes with a sum- mary of theoretical issues in the case.

Team-based Structures and New Forms of Organizing

The literature on organizational forms and archetypes has for a long time been troubled by the inadequacy of traditional structural forms (functional, divisional and matrix structures) to capture the richness of today’s organizational world. The literature has started to develop new metaphors for at least some of the features of new and innovative forms of organizing. Examples of such metaphors are networks (Miles and Snow, 1986, 1992; Nohria and Eccles, 1992; Fulk and DeSanctis, 1995), projectified organizations (Hastings, 1996; Turner, 1999), process organ- ization (Fulk and DeSanctis, 1995), virtual organizations (DeSanctis and Staudenmayer, 1998), and the cellular form (Miles et al., 1997). As argued in many places in this book, any attempt to capture new forms of organ- izing needs to adopt a holistic view of organizations, integrating structures, processes and boundaries (Whittington et al., 1999b). The results from the INNFORM project survey (see Fenton and Pettigrew, Chapter 1 in this volume) indicate that finding the right balance between different aspects is crucial for the success of the organization. This review, primarily based on the structural and processual aspects, argues that a team-based structure, arranged to support the business process, is a good example of a new form of organizing (Jarvenpaa and Ives, 1994).

The literature on new and innovative forms of organizing, as well as the human resource management literature, often stresses the use of decentralized, group-based structures. Concepts like team-based struc- tures (Keidel, 1990; Hirschhorn, 1991; DeMent, 1996; Hastings, 1996; Baldwin et. al, 1997; McHugh, 1997; Sewell, 1998), project forms of organizing (DeFillippi and Arthur, 1998; Lundin and Midler, 1998),

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organizational learning (Bouwen and Fry, 1991; Dodgson, 1993; Boudès et al., 1998), are often used to describe the features of organizational innovation. It is argued in this chapter that the team, as a basic building block in the organization, is one promising starting point for under- standing how organizations manage to combine horizontal and vertical coordination and communication.

When reviewing the literature on team-based structures, one is faced with a problem. As noted by a number of writers, the use of words like team-based management, TQM, BPR (Business Process Reengineering), virtual organizations and HRM, reflect fads and trends in the manage- ment industry, rather than genuine innovation. The claims made in the normative management literature are often totalizing (De Cock, 1998), with a strong tendency to close the discourse using ideological argu- ments (Sinclair, 1992). The empirical evidence is also weak, with few valid propositions put forward and tested in the literature (Jaffe and Scott, 1998). The perspective taken in many studies on team-based struc- tures and other group-based structures is internal, focusing on the group as such, instead of on the team-based structure as a key organiz- ing principle for the entire organization (Campion et al., 1996; Little and Madigan, 1997). The case described here is an example of how such company-wide organizing can be implemented. It addresses a number of theoretical issues connected to new forms of organizing in general, and internal network organizations in particular.

The literature on team-based management and other forms of group- based management has a marked intra-group perspective. The focus is more on the group’s functioning and less on how teams can be organ- ized to form bigger units. This also means that less emphasis is put on the integration of teams. This chapter will argue that it is important to describe and understand the arrangements for integrating teams. The case of Saab Training Systems shows how this can be done on a com- pany-wide scale.

A second marked trend in the literature is the focus on processual and dynamic aspects. From an HRM perspective Mirvis (1997) argues that leading companies focus on organizing for innovation by involving employees, conducting training and mentoring programmes, using flex- ible work arrangements and team-based work redesign. In the field of project management it is often argued that companies organized by projects are an important arena for innovation (Anderson and Larsson, 1998). The notion of the projectified society with an increasing number of companies organized by projects, or other forms of temporary organ- ization, draws attention to processes in companies (Lundin and Sôderholm, 1998), how they organize innovation and the ongoing busi- ness processes. Or to quote Hastings (1996:107): ‘The resulting organization can be conceived of as a constantly changing kaleidoscope of teams, forming, delivering work and dissolving as required.’

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A key question which is addressed later in the chapter is how a team- based structure can be combined with a strong focus on processes in order to achieve company-wide innovation. The case of Saab Training Systems illustrates how a team-based structure is organized to follow the core business processes of the firm, and how this has helped Saab to re-engineer its operations, making it very successful in its industry (defence). The new structure of the company can be described as a cross- functional heterarchy (Maccoby, 1991), where teams are organized to support key elements of the business process (the design phase of proj- ects, contacts with customers, logistics, deliverance and innovation). Miles and Snow (1995) use the metaphor of a sphere to describe an organization with an ability to ‘rotate’ resources depending on market demands by using internal project organization and external alliances to build flexibility.

An important theoretical issue concerning team-based structures is how company-wide coordination and communication is achieved. The network organization, with its delayered and decentralized structure, cannot rely on the hierarchy to provide coordination (Nohria and Eccles, 1992). Coordination is instead created by horizontal means (IT-solutions, management-by-objectives, meetings, HR development, and by build- ing a corporate culture). This confronts top management with a dilemma – how to build on the strengths of team-based structures, in terms of specialization, motivation and knowledge sharing (Little and Madigan, 1997), at the same time as company-wide coordination is achieved. The case presented below will show how Saab Training Systems has tried to solve this dilemma.

This case will focus on three analytical themes. The first has to do with the restructuring of the company – the transition from a tradi- tional functional structure to the present team-based structure, and towards a more project-oriented company in the future. A second theme has to do with how to organize both innovation and an effective busi- ness process. A third theme is that of the different processes in the company (planning, business and innovation). The key research ques- tions addressed in the chapter are:

� How can a team-based structure be organized to reflect the basic business process in a company?

� What are the advantages and disadvantages of a team-based struc- ture in a highly competitive environment?

Research Methods

This case was chosen to illustrate an innovative organizational design that had also proved to be highly effective (in its industry). The Saab

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case has a number of interesting features. The company has built a con- sistent team-based structure with a strong focus on horizontal principles of organizing. Virtually the whole company is organized in teams for different purposes. This is combined with a strong market orientation involving many teams and a strong focus on knowledge management. The team-based structure has recently been further developed by a wider use of projects for innovation purposes. Needless to say, the com- pany also has a high degree of decentralization and delayering.

This company is an excellent example of a company in transition, and there are good opportunities to evaluate different organizational exper- iments. It also provides a managable research unit (primarily in terms of company size with 260 employees), even though the company is part of a group with more than 5,000 employees. By choosing a medium-sized company we had the opportunity to acquire considerable detail about its features and organizing principles. A clear contribution of the Saab case is the description of microprocesses of organizing, with a strong focus on how the organization works operationally. The case study method provides a good opportunity for developing a thorough under- standing of the processes of organizational change within a company (Yin, 1984; Bryman, 1989; Pettigrew, 1990).

In total, 14 interviews were conducted with respondents representing the important parts of the company. Two of the key respondents were interviewed three times over a one-year period. The selection of respon- dents was made in dialogue with the Managing Director and the Personnel Manager. Special care was taken to avoid biased respondents. To avoid that we interviewed two persons representing each type of function. The method used was qualitative, and focused on the respon- dents’ descriptions, or stories, of their company and its radical change processes (Reason and Hawkins, 1988).

All interviews were made using an interview pro-forma agreed upon in the INNFORM research group. The interviews, lasting between one and two hours, were tape-recorded and transcribed. Field notes were also taken during interviews and informal discussions with the Managing Director and Personnel Manager. The case description is also based on secondary material (including company descriptions, brochures and annual reports) and has also been thoroughly checked by all respondents to ensure that it provides an accurate description of the company.

Drivers for Change in the Defence Industry

Saab Training Systems started its operations in the mid-1940s producing range equipment for military training purposes. In the mid-1970s the company started the production of laser-based simulators, the most

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successful of the present business areas. The company is operating in the defence industry (more specifically army material) which is charac- terized by a number of broad trends.

Despite the fact that a number of wars are going on, the trend during the 1980s to 1990s has been disarmament, with political ambitions to reduce military budgets. The collapse of the Soviet Union and the end of the cold war led to a drastic reduction of military spending at the same time as the peace movement has been growing stronger.

The industry is also characterized by a severe overcapacity which has forced it into extensive structural changes. One study of the aircraft industry (Eriksson, 1995), describes the structural changes that took place from the 1960s to the 1980s. One main trend is the rapid closure and merger of companies. During the 1990s this trend accelerated and complicated networks and alliances of subcontractors have emerged. Eriksson points to military demand (with a pronounced arms reduction in the Western world) as a clear driver for change (with mergers and international collaborations as the obvious responses).

Compared to other industrial markets it is hard for this industry to receive national support and it also has strong protectionist tendences. This causes a political environment affecting the business process (nego- tiations with states rather than other companies) and protracted decision making. The ambition to reduce military budgets has resulted in fewer repeat orders.

All these trends make the industry very different from more tradi- tional consumer and industrial markets. The sales process too is very different, with long and complicated negotiations with military and political counterparts. Taken together, this makes it hard to predict future sales. As a market leader in its niche, Saab Training Systems has attained a strong position, with long-term contracts with major cus- tomers in the US, UK, Germany, Norway and a number of other countries. However, the company is very exposed to national policy changes, economic crises and changing procurement policies. The deci- sion taken by individual customers to buy training equipment can be affected by a number of factors in society. In Saab Training Systems this uncertainty is reflected in a flexible team-based structure that can respond quickly to customer demands. The company also invests heav- ily in developing new applications and exploring new markets.

The defence industry (as a whole) is often described as an industry in deep crisis. The 1990s was marked by intensive restructuring of the industry and a stronger reliance on strategic alliances. Since the new military policy programme (adopted by the Swedish government in 1996) the Swedish defence industry has entered a number of interna- tional collaborations. The Saab Group, for instance, has started a formal collaboration with British Aerospace to market the JAS 39 Gripen fighter in a global arena. The Eurofighter project is another example of the

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trend towards international collaboration (between the UK, Spain, France and Germany). Mergers are numerous, with Boeing’s takeover of McDonnel Douglas in the mid-1990s as the most spectacular example. Saab Training Systems is obviously affected by the trends described above, especially the competitive situation with reduced national budg- ets for military spending. Their products, though, are special in a number of ways. The company has so far not entered into any formal collaborations with external partners (apart from the regular agents and consultants used in the different countries where they sell their prod- ucts, and subcontractors for production), either for marketing or for technical purposes (product development and production).

The high degree of uncertainty in the industry, and the need for flex- ibility in the marketplace, has nevertheless forced the company to react. Instead of entering external alliances, the company has chosen a strategy of concentrating on their core competence, with a focus on laser-based simulation. The products are, in a sense, much more cost-effective for the customer. The realistic simulation technique decreases the need for using ‘sharp’ammunition and other equipment. The products are ‘light- weight’ and easy to handle, reducing the need for advanced support systems.

Another important reason for the success of the company is its close contacts with customers. Not only marketing but members of different product and application teams frequently visit the customers. This is also a key aspect of organizational learning in the company.

The trends in the defence industry described above are clearly driv- ers for the organizational change in Saab Training Systems. At the beginning of the 1990s the company faced a very difficult situation with productivity problems and a very turbulent market. As one team man- ager stated: ‘The big focus we had during that period [1992–1993] was to keep up with delivery times.’ The Managing Director similarly argued: ‘The purpose of the proposed change ideas was to strengthen our com- petitiveness by a radical lowering of throughput times in both development and production.’

To deal with this situation decisions were taken to focus on the com- pany’s internal operations – how to gain efficiency by creating a more flexible team-based structure that could be integrated with a more process-oriented view of doing business – and concentrate on their core competence (laser-based simulation).

Compared to the main part of the defence industry, Saab Training Systems can be described as a prime mover when it comes to organiza- tional renewal. While the trend in the industry has been to build competetive strength by strategic alliances, Saab Training Systems has focused on adding to its own strength. The flexible organizational design is unique not only to the Saab group, but to the industry as a whole: ‘We would not be competitive if we followed the rest of the

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industry. They tend to build in too much administration in the compa- nies’ (team leader).

Saab Training Systems and the Saab Group

The Saab group consists of a number of independent companies (Saab, Saab Aircraft, Saab Dynamics, Saab Ericsson Space, Ericsson Saab Avionics, Saab Combitech and Saab Training Systems). The major prod- uct in the Saab group is the fourth generation combat aircraft JAS 39 Gripen. During 1998 Saab adopted a new structure with five business areas: Military Aerospace, Space, Training Systems, Commercial Aircraft and Combitech. This chapter focuses on Saab Training Systems, a com- pany that has been transformed from a traditional functional structure in the early 1990s to a highly effective team-based structure. No other part of the Saab group has made such a significant change in organiza- tional design.

Saab Training Systems’ annual report for 1997 reports a turnover of 668 million Swedish kronor (£52 million sterling), with 260 employees at the end of that year. The company has experienced rapid growth in terms of turnover figures, from £15 million to £50 million from 1992 to 1997 (the number of employees during that period increased from 200 to 260). This rapid growth is partly due to the fact that the company received two major international orders in 1992 (followed by a number of successful deals in subsequent years). But it should also be stressed that 1992 was the year when the new team-based structure was imple- mented on a large scale.

Although the company is formally a part of the Saab Group (Saab AB), it is generally acknowledged in the company that the links to Linköping (where the corporate headquarters is situated) are loose. Saab Training Systems is given a lot of operational freedom (both in financial and organizational terms), with the Managing Director (Mr Hans Robertsson) enjoying a very good reputation in the Saab group. The formal corporate governance structure (with Saab Training Systems being completely owned by Saab AB and the Investor group, the dom- inant shareholder in Saab AB), does not reflect the strong informal position which the company has in the group.

The Saab Group consists of fairly independent companies, with Saab Training Systems holding a strong positition. The companies, though, are interrelated in various ways. As well as sharing a number of central administrative resources, there are also examples of transfers of know- ledge between the companies. This transfer, though, should not be overstressed, at least not at the group level. The technologies applied in the companies differ, and it is generally agreed in the group that the ideal of transferring knowledge has not reached its full potential.

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Transfer of knowledge is an issue that is frequently discussed as a disadvantage of the team-based structure in Saab Training Systems. The respondents argue that a lot of tacit knowledge is embedded in the teams (and members of the teams) and the products they represent, and that it has been problematic to transfer experience between teams. One of the team leaders described this problem: ‘We keep files for all documentation and descriptions, but they are not distributed among the teams. If you don’t know what has been done before, and by whom, it’s difficult to search for that information in the current filing system.’

Major Business Activities in Saab Training Systems1

The company’s special niche is computer aided training equipment for military purposes, using visual simulation of different types of terrain and situations, and laser based simulation. The laser-based systems are the core competence of the firm (with a number of patents showing the high technical profile of the company and its employees). The laser sim- ulator BT 46 is by far the largest product area in the company. A second product area is virtual simulation. The Saab BT 61 is a graphics-based simulator that uses authentic photographic environments and three- dimensional moving targets for virtual simulation. The BT 61 accounts for about 20 per cent of the company’s turnover. The company is also involved in producing range equipment for live firing. Although this was the founding product of the company in the 1940s, the product area is a minor part of the company’s current operations.

The business idea was to give the customer state of the art training systems using experience-based learning. Training Systems is a world leader in its area of simulation equipment, based on laser technology for aimed weapons. The largest markets for the present products are the UK, USA and Germany. The company is truly international in its oper- ations. More than 90 per cent of manufactured goods are exported.

The economic stability of the company is guaranteed by a number of long-term contracts with a predictable planning horizon. These con- tracts are reflected in the internal organizational structure in the form of project teams for five of the major contracts: for example, a team for adapting the laser simulator BT 46 to the US army’s Tank Weapons Gunnery Simulation System (TWGSS) and to the British army’s Direct Fire Weapon Effects Simulators (DFWES). In addition to these estab- lished contracts (and negotiations for new contracts) the company also invested a lot of resources in developing new applications without a customer ordering a development project (the normal procedure in the defence industry is that development is customer ordered). The inno- vation process in the company thus bears more resemblance to that of

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‘normal’ manufacturing companies than to other companies in the defence industry.

Company Philosophy

When visiting the company one is struck by a commonly held philoso- phy. This goes back to a very strongly formulated vision by the company’s Managing Director. A key concept often used by the Managing Director is learning. A founding idea of the team-based struc- ture is that the organization should reflect the learning ideals of the products. Some of the key principles of learning in the company are described below:

Experiential learning One important aspect of organizational learning is to create opportunities for the individual to learn by doing. A significant arena for feedback is direct contact with the customer: product and application teams often meet the customer to discuss various issues concerning the product. The team itself is also an important factor in the feedback to individuals. The Managing Director stresses the fact that the teams should have access to all necessary information and that work results should be made visible and available. All respondents also men- tion the weekly meeting between all team leaders and the management team (including the Managing Director).

Cross-functional teams The teams are organized to be an environment for individual learning. To achieve this goal, teams are organized around objects (subsystems of the products) rather than functions. The teams are in most cases cross-functional, bringing together people with different competences. They are thus specialized in terms of products but not in terms of competence.

Problem solving The product teams are responsible not only for pro- duction but also for construction and product development. This includes both developing products and production processes. A major ambition is to solve problems in the group rather than individually, thus encouraging creative thinking.

Information The explicit policy of the Managing Director is that infor- mation should be free and available. Each team should have access to all the information they need. The information issue also has another aspect, the need to make work results visible and available. An ambition in the company is to develop a system for storing knowledge in the organization rather than with the individual. The company has a well developed network of personal computers, giving the different teams

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access to the planning system LOTS, and to the control system. This intranet is also frequently used for internal communication in Saab Training Systems.

Individual growth Growth of individuals is a strong value in the com- pany. Individuals are encouraged to try out new ideas and to take risks. Individual growth is also stimulated by an emphasis on trial by error, to use not only intellectual but also emotional capacities.

Accumulation of experience The Managing Director stresses that expe- rience must be accumulated in the organization. This is achieved in a number of ways. The products in themselves are obviously a key factor, with a lot of knowledge stored in the current line of products. The busi- ness process (described below) has a well developed logistic of the three product areas (when they come to production). A clear ambition is also to accumulate experience not only in the individual but also in the team and the company in general.

The Transition from a Functional Structure to a Team-based Structure

In the early 1990s the company faced a difficult situation around meet- ing delivery times in both production and development. The relations between production and development seemed to be especially crucial for the overall effectiveness of the company: ‘We have identified the difficulties with development issues, and creating new products with insufficient resources’ (team leader). The company also felt a need to respond more quickly to environmental changes and stressed the value of communication between different parts of the company. The manag- ing director of the company had for some time been troubled by the ineffectiveness of the company. In 1992 he took the initiative to start an experiment with a team-based organization. The underlying idea was to create a more flexible structure: ‘All this requires that we develop new flexible processes, communication patterns and a new organizational structure’ (Managing Director).

When the company received two major orders at Christmas 1992, a decision was taken to implement the team-based structure on a com- pany-wide basis. Even though the idea for this had grown for some time among the members of the management team, market pressure forced the company to rapidly implement a new and more effective structure. Most respondents identified these two major orders as the incident that triggered the implementation of the new structure.

The philosophy behind the team-based structure is very much based on the ideas of the Managing Director. All respondents in the study

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agreed that he is the innovator and clear leader of the organizational change. The rhetorical skills of the managing director are extraordinary and they were a decisive factor in the success of the change project. The opinions of the employees concerning the managing director are homo- geneous: he is depicted as visionary (and with the communicative skills to share his visions with the employees) and at the same time authori- tarian and very demanding.

The radicalness of the change can best be understood if we compare the old and the new structures. Before 1992 the company was organized into functions with two construction departments (one focused on cus- tomer ordered development and the other on internally ordered development) and one production department, with an internal hierar- chy in each department. The company also had a marketing and a purchasing department (see Figure 8.1 below).

The old structure was marked by an inadequacy to deal with more market-driven production processes and had problems in meeting delivery dates. One significant reason for that was the hierarchical and functional structure that created cross-functional problems of coordina- tion and communication. This became a crucial problem when new contracts demanded that technical development was rapidly imple- mented in the production process. The old structure had severe problems in achieving this.

In the new structure of the company a total of more than 40 teams report directly to the managing director and the management team. The number of hierarchical levels has thus been reduced from three to two. The ideal size of a team, mentioned by a number of respondents, is 6–8 persons. When a team grows bigger it is split into two or more teams.

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CEO and management team

Functional manager

production

Functional manager

development

Functional manager marketing

Functional manager

purchasing

Supervisors and production

groups

FIGURE 8.1 The has team-based structure in Saab Training Systems

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There are also some examples of such ‘cell-division’ among product teams (Miles et al., 1997). The purpose of this organic growth of the organization is to increase flexibility and adaptability to environmental change.

The team-based organization is structured according to basic busi- ness processes. At the beginning of the business process we find five business teams and the market organization of the company. Each busi- ness team is responsible for one or more products, and one or more geographical areas. The business teams are responsible for negotiating contracts with the customers, and for monitoring contracts (the business teams have financial responsibility for each contract).

When a contract is signed they place a production order with a deliv- ery team which plans the logistics of each order (using a Materials Planning System called LOTS).2 In addition, the delivery team is respon- sible for the final testing of the product before shipping to the customer. The production planning process also involves a purchasing team (it is more correct to describe this team as a central function with an overall responsibility for purchasing).

For each contract an application team is involved in adapting the company’s products to the needs of the customer. The business team

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CEO and management team

Business teams

Application teams

Delivery team

Product teams

Purchasing team

Responsible for company-wide supply

Responsible for production and development

Responsible for logistics and other internal planning

Responsible for adapting products and processes to specific customers

Overall responsibility for customer-driven projects

Staff units

FIGURE 8.2 The new team-based structure in Saab Training Systems

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responsible for a contract orders an application, and the application study by the application team then functions as a blueprint for the dif- ferent product teams involved in the order (the business team places the formal production order with the different product teams).

Design and production of the different units in a project is carried out in one or a number of product teams (there are 14 product teams in the company, with 12 of them working in the product area of laser simula- tors). The product teams are organized according to products (subsystems), that is, optics, laser simulators, sensor modules. In addi- tion to these teams involved in the business process there are a number of central functions – personnel, quality, purchasing and finance. The new organizational structure is depicted in Figure 8.2.

A Process Perspective on the New Team-based Structure

The business process is characterized by two different processes. The first is the production process: driven by contracts with customers, this primarily involves the delivery team and different product teams (the delivery team being responsible for production planning). The second process is that of construction and development. This is either customer driven (construction and development needed for specific contracts) or internally driven. Construction and development primarily involves application teams and product teams.

Coordination of the different teams involved in an order is a very important issue, due to the fact that the structure created for an order is temporary. The mix of teams involved in an order is dissolved as soon as the system is delivered to the customer. Any product team can also be involved in a number of different projects at the same time. The respon- sibility for the process coordination is split between a business team (having the commercial responsibility for each project) and the delivery team (responsible for production planning).

Since neither the business team nor the delivery team has the detailed knowledge necessary to place orders with the product teams, they need application teams to define the need for different parts in a system.This means that the application teams fulfil a key coordinating role in the business process, and they have a lot of contacts with different product teams. The work of the application teams is often contingent upon development in product teams, and especially when it comes to new applications (where the need of process- and product development is higher). Some applications, though, only require repetitive production of more standardized parts. The relations between application and product teams are therefore interdependent rather than sequential (DeSanctis and Staudenmayer, 1998).

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The basic idea behind the team-based structure is to create an inno- vative and learning organization. The product teams, for instance, are responsible not only for producing their goods but also for construction and product development (including process development). One reason for building this organization in 1992 was to foster a more entrepre- neurial spirit. To quote the managing director: ‘Each team should be capable of becoming their own company.’ It should be stressed though that the teams are not profit centres in the full sense, but are better described as cost centres with a high degree of operational freedom.

The descriptions in this section indicate a number of characteristics of new forms of organizing in Saab Training Systems. Below I summarize a number of these characteristics. The list is based on the survey vari- ables of the INNFORM-project (see Fenton and Pettigrew, Chapter 1 of this volume).

Decentralizing When the new structure was implemented in 1992, the five type of team were given a lot of operational freedom com- pared to the former structural arrangement, in particular operational decisions on production and development by the product teams. This freedom was balanced by a strong planning process in the com- pany, with business teams responsible for the overall planning and the delivery team responsible for the production planning. The Managing Director has a very strong position in the company, and plays a crucial role in organizational integration. Delayering The number of hierarchical levels between top management and operating teams has decreased from three to two as a consequence of the team-based structure in 1992. Communicating horizontally and vertically The production and devel- opment processes in the company have forced the different teams to intensify cross-functional communication. Communication has also increased between different teams and the customers (especially application and product teams). Information technology The need for more efficient planning in the new team-based structure forced the company to introduce an up-to- date computerized planning system. This system was introduced when the team-based structure was implemented and it has been gradually refined. The use of IT has grown in importance as throughput times have been shortened, and where customers require more frequent contacts with different teams. Practising new HRM When the team-based structure was intro- duced, the company started an incentive system based on the overall results of the company, the team performance, and the results of each individual. This is done according to an elaborate scheme developed since 1992, where performance on the company, team, and individual level is measured on a number of dimensions. Some

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respondents argue that this incentive system has been vital to the success of the team-based structure. One central aspect of the incen- tive system is that it is transparent. The principles are clearly stated and open for discussion and improvement. Downscoping The decision to change the structure was accompa- nied by a change in the overall strategy of the company. A decision was taken to focus more on the core competence of the company, the laser-based training systems. This strategy has been successful so far in terms of growth in that business area. Project forms of organizing The experiences from the first five years of the team-based structure show a need for the project organization of development issues. During 1999 the company moved to a more project-based structure including development issues. The major difference between the team-based structure and the new project- based one is the temporary nature of the project groups formed in the new organization (Turner, 1999). It should be remembered that a team, even though it is depicted in the literature as a highly flexible organizational structure, is still a form of departmental structure, with the teams being organized for long term operations (compared to the project, which is organized for temporary operations).

The change initiative taken by the managing director in 1992 was very radical (in the context of the company and the industry). The major changes took place at the end of 1992 and during 1993 (including estab- lishing the team-based structure, and building a planning system to deal with the production process). The period from 1994 until 1998 was char- acterized as a period of implementation and refining of the new structure. During 1998 the change activities increased, partly due to the building of new production facilities and partly due to an evaluation of the team- based structure. After the summer of 1998 a new structure was presented and discussed in the company. Even though this new structure is not as radical as the change in 1992, it still presents some organizational devel- opment challenges. At the beginning of 1999 it was also announced that the managing director had decided to leave the company, to start a new company and focus on developing new product ideas.

Process Sequencing – Learning from Experience

The team-based structure was an attempt to increase effectiveness in the construction and production process. The relations between the former construction and production departments were considered a major problem and throughput times for customer projects were considered to be too high. This was due to the functional structure, with two different departments responsible for crucial parts of the projects.

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This team-based structure has been working for more than five years and was evaluated in 1998. This evaluation shows a mixed picture. The structure’s main strength is effective production (in terms of time and cost), or as some respondents described it: ‘They are effective in doing more of the same thing.’ The teams are delimited in terms of objects (products), and responsibility and authority. They have achieved a high degree of expertise and specialisation in their area of responsibility. It is generally acknowledged that the product teams are highly effective when it comes to production.

The major weakness of the team-based structure is in achieving the same level of effectiveness when it comes to development issues. As mentioned before, each product team is responsible both for production and construction/development. It seems production issues have been the major focus for many of the product teams. As described by one of the team leaders: ‘When it comes to production the team has very dis- tinctive deadlines, you have to deliver at a certain date. The team members tend to give priority to production issues at the expense of development.’

The accumulation of experience is another issue that is frequently dis- cussed as something that needs to be developed. A major problem is that experience is very much coupled to the individual teams. One ambi- tion is to create a setting for both documentation of projects/products and for development. In order to deal with this a new library was built where all projects in the company are stored and are easily accessible.

A third problem discussed is the coordination of different teams, where it was argued that more effective coordination could bring down costs. It is hoped that this will be achieved by bringing together all per- sonnel involved in production in one team, and by creating project teams for development issues. As noted by one of the team leaders: ‘The teams behave like individuals. The consequence has been that we have not achieved the coordination between teams that we had hoped for.’

Conclusion

The team-based structure has been very successful in meeting the demands of the customer in terms of delivery deadlines and budget restrictions. A common opinion in the company is that this effectiveness has been at the expense of new product development and radical inno- vation. The focus in the product teams has been on delivering products on time. A general feeling in the company is that more emphasis must be put on development tasks if the company is to keep its position as an innovator in the market. If we follow the argument of Miles et al. (1997), the market situation pulled the company towards a stronger focus on

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innovation, making the integration of production and development even more urgent. In the emerging era of innovation, the capacity of the firm to rotate resources, create organizational learning and constantly change is crucial (Miles et al., 1997).

During the second half of 1998 the company gradually adopted a new structure for production and development issues. One large team was created for serial production (approximately 25 persons) in the established product areas. This new team (or department) is strictly focused on production issues (including a strong focus on continuous improvement in production processes and quality issues). It should be mentioned though that serial production still means customer-ordered production and not mass production. The ambition is that the team has total responsibility for production, planning, purchasing (taken over from the purchasing department and including contacts with subcon- tractors), logistics and test functions.

The team for serial production is supposed to be focused on building an effective production process. Compared to the former product teams, the new team can utilize resources in a more effective way (remember that the sharing of resources between teams was a major problem in the team-based structure). They can achieve a higher degree of specializa- tion, without having to deal with new product development. Whether this will be the case or not is a matter of dispute in the company. Some respondents fear that the positive side of the team-based structure (a high degree of motivation among team members) will be lost in the new serial team. It is important to stress the fact that the new production team will still function as a cross-functional heterarchy with extensive contacts with customers and an extensive bridging of resources inter- nally (Maccoby, 1991).

A pool of people was created for development issues, primarily to develop new products. This pool is organized into project teams for different development projects. The responsibility of each project team is to develop products or parts, not only as concepts or prototypes, but as products that could go directly into the team for serial production. The focus here is not only on developing new products but also on test- ing the products.

The new project-based structure presents some interesting leader- ship challenges, compared to the more fixed departmentalized structure (Hastings, 1996; Lundin and Sôderholm, 1998). The team-based struc- ture is still a form of departmentalized structure, with the team as the basic building block (in the form of small departments), while the proj- ect-based structure for development issues introduces a temporary form of organizing in parts of the company. From a top management per- spective one problem is how to handle a portfolio of projects in different phases of the project life cycle (Jessen, 1996).

This management problem took on another dimension when it was

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announced that the managing director had decided to leave the com- pany. The timing of this decision was probably deliberate, since he very much personified the team-based structure. In the interviews he stressed the fact that he wanted to ‘move on’ to new challenges. The company history (during the 1980s and 1990s) is very much connected to him, making him a ‘critical node in the organization’ (Baker, 1992: 399). He had a strong technical interest and kept a tight control over development issues. The dilemma now is how to deal with the organi- zational vulnerability arising from a reliance on his technical skills and strong control.

The analysis so far in this chapter shows that a team-based structure can be a very effective way of organizing activities. However, it is still a form of departmentalized structure. Each team tends to build its own culture and creates boundaries between itself and other teams. The challenge in the team-based structure is thus to enhance cooperation between teams. This challenge is most apparent in relation to develop- ment issues. The teams are highly effective when it comes to production, where cooperation is ensured by the formal planning system of the company. The planning system, though, is less effective when it comes to managing development and innovation. The expec- tation is that the new project organization will deal with this in a more effective way.

From a theoretical perspective, the results from the evaluation of the team-based structure are interesting. The assumption in the literature on team-based management is that the team-based structure, per se, is flex- ible and with a high motivation to innovate. As the case of Saab Training Systems shows, the truth of this assumption is far from evident. In fact, innovation seems to be the crucial problem in the team-based structure. This paradox can be understood from a cultural perspective. The single team gradually develops into an arena of identification for the individ- ual. As the company has moved into a looser configuration the importance of this arena for identification has grown. This factor of cul- tural belongingness is evident in the interviews, where a number of respondents argue that the teams fulfil key roles for the individual, being ‘the only stable place in a world that is constantly moving’.

This case has shown that the teams have given priority to meeting production deadlines rather than focusing on development issues. The respondents argue that this is due to the internal focus developed in each team. It has also been shown that the team-based structure has to be balanced by a strong focus on the business process, creating an understanding of the whole process between the teams. Frequent con- tacts between customers and different product teams have been one way of doing this.

One obvious question that can be raised, based on the analysis in this chapter, is why the company has not entered into any strategic alliances

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to build competitiveness. As argued by Miles and Snow (1995), among others, a major trend among innovative companies is increased reliance on an external network to build competitive strength. Saab Training Systems deviates from this trend. Even though the theoretical argu- ments for external networking are clear-cut (in terms of enhancing organizational capabilities and increasing flexibility: Perrow, 1992), the company has, so far, not realized the need for external networking.

Notes

1 The description in this section is based on technical descriptions of the prod- ucts and on interviews. 2 The system is integrated with the purchasing system and is used for sched- ule control and for preliminary calculation and cost accounting.

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