The adoption of Operation Management practices for reasons of legitimacy

Operations management innovations such as Total Quality Management (TQM), Just in Time production (JIT), and lean production have become ubiquitous in firms around the world as of late. It would be intuitive to assume managers adopt these techniques to improve efficiency or effectiveness of operations but is this the case? Ketokivi & Schroeder (Ketokivi & Schroeder, 2004) state three different perspectives that address the reasons as to why organisations choose to adopt certain practices, these are: structural contingency, strategic contingency and neo institutional arguments.

Strategic contingency states that choices made which effect how a company is run are constrained but not determined by the environment the company is in (ref wiki). In other words some changes can be made to the organisation irrespective of its environment. Structural contingency considers the entire organisations relationships with suppliers, clients and unions and focuses on managing these relationships. Neo institutional arguments suggest that organisational practices are adopted to acquire legitimacy in addition to, or irrespective of performance increases (Ketokivi & Schroeder, 2004). These arguments are usually classified as coercive, mimetic, or normative isomorphism and were first postulated by DiMaggio and Powell in the early eighties (DiMaggio & Powell, 1983). Neo institutional arguments have become powerful in explaining why the selection of processes occurs in a range of fields, operations management being no exception. This literature review will be considering neo institutional arguments, and specifically how they lead to the adoption of operations management practices for reasons other than that which can be explained by strategic or structural contingency. Next summaries of each neo institutional argument are given.

2. Neo institutional arguments

2.1 coercive isomorphism

DiMaggio and Powell (1983, p. 150) state "coercive isomorphism stems from political influence and the problem of legitimacy. Coercive isomorphism results from both formal and informal pressures exerted on organizations by other organizations upon which they are dependent and by cultural expectations in the society within which organizations function. Such pressures may be felt as force, as persuasion, or as invitations to join in collusion"(p. 150).

2.2 mimetic isomorphism

They define mimetic isomorphism as "resulting from standard responses to uncertainty"(DiMaggio & Powell, 1983, p. 150). Uncertainty is a force that encourages imitation. When technologies within an organisation are incorrectly understood (March & Olsen, 1976), when the environment creates uncertainty, or when goals are ambiguous, organizations may model themselves on other organizations.

2.3 normative isomorphism

They also state that normative isomorphism is "associated with professionalization"(DiMaggio & Powell, 1983, p. 150). Professionalisation can be interpreted as a set of rules put in place by members of an occupation to define how that occupation operates, this controls "the production of producers" (DiMaggio & Powell, 1983, p. 150).

These arguments help explain changes in organizations by giving reasons such as legitimacy to explain why seemingly inefficient practices are adopted when there are possibly better options available. First we need to understand legitimacy and why it is desirable in operations management.

3. Legitimacy

3.1 Definition

Legitimacy is defined by Suchman (Suchman, 1995) as "a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions." Suchman then goes on to describe three types of legitimacy, pragmatic, moral, and cognitive. For the purpose of this literate review legitimacy will be considered in its single original form.

3.2 Why is legitimacy desirable in operations management?

The idea that an organization will be rewarded for its legitimacy is a universal understanding in organizational theory (Elsbach & Sutton, 1992), p700. Meyer and Rowan (Meyer & Rowan, 1977) state that legitimacy gains of an organization can be used to strengthen support and secure survival, making it very desirable. Oliver (Oliver, 1990) discovered that legitimacy is one of six critical contingencies of relationship formation. Or more simply legitimacy is a factor that prompts organizations to form inter organizational relationships, this also shows that legitimacy is a desirable feature to have as an organization. Finally Staw and Epstein (Staw & Epstein, 2000) discovered that higher CEO pay is a direct result of companies being more legitimate.

From above it can be seen why organizations would want to be considered legitimate however it is difficult to determine why organizations adopt certain strategies or changes and it is unlikely they would be willing to divulge this information, but there are signs that hint towards legitimacy seeking adoptions. Firstly, hypothesis 1: a lack of improved performance could suggest evidence of attempts at legitimacy rather than efficiency (Westphal, Gulati, & Shortell, 1997). That is to say if a firm adopts a practice and no improvement of efficiency or effectiveness is seen then the conclusion drawn may be that efficiency was never the intended goal of adoption, but rather legitimacy, which can be gained regardless of improved efficiency. This was proven by Staw and Epstein (2000) when their findings in 2000 indicated that association with popular management techniques did not improve performance, but did increase reputation. A second indicator, hypothesis 2 given by Dimaggio and Powell (1983) when they say that improved performance is the motivation behind early adopters, but over time practices can become blended with a value that surpasses the technological needs of the task performed. Hypothesis 2: late adopters of innovations are more likely seeking legitimacy than early adopters. This statement makes intuitive sense if we think of legitimacy as a person's expectation of a practice for someone to think of something as legitimate they need to have a preconceived notion of its expected result. In the case of organizations wanting to be legitimate the expected result must be more desirable than the unmodified example. So for preconceived ideas to be made about a practice the practice must be in use before the adopters use it. Hence evidence of firms adopting practices for reasons of legitimacy is less likely to be found in the beginnings of an organizational practice and more likely to be found after the practice has been legitimized.

This follows on to the aim of this literature review, to find any evidence of the adoption of techniques, practices, or procedures in the field of operations management for reasons of legitimacy through DiMaggio and Powell's 1983 neo institutional arguments. It is apparent this may not be easy as leaders of organisations are unlikely to explicitly state that they have adopted practices for reasons of legitimacy rather than efficiency but as stated earlier by hypotheses 1 and 2 there are signs to look for which indicate possible legitimising adoptions. In this sense I am trying to find evidence of legitimacy adoptions in the literature when there may be no evidence given, or at least studies may not have been undertaken to highlight its presence. A result showing either for or against would provide valuable insights. The extensive literature on the internet will be used to search for this evidence as well as the university provided search engines such as Pro Quest and Web of Science.

4. Operations management practices

4.1 A brief background

The aim of operations management is to ensure that business operations are efficient and effective (Operations management http://en.wikipedia.org/wiki/Operations_management). By efficient it is meant that resources used are as little as needed, and effectiveness suggests customer requirements are met. There are key organisational technologies that help increase efficiency and effectiveness which have become more common in the field of operations management than others, such as TQM, ISO 9000, lean manufacturing, JIT technologies, and supply chain management (Staw & Epstein, 2000). It would be sensible to think these technologies have increased in use among organisations because they have helped achieve higher levels of efficiency and effectiveness in the past. The following gives a brief background on these operations management techniques.

4.2 Lean manufacturing

The origins of lean manufacturing can be traced back to pre 20th century when Benjamin Franklin documented most of the basic goals still present in lean manufacturing today (Munteanu & Olteanu). The effectiveness of lean manufacturing has become widely known due to the successful implementation by Ford motor company in the early 20th century and Toyota motor company post World War Two when JIT systems were also introduced (Munteanu & Olteanu). In both cases implementation of lean manufacturing was the key attribute associated with the high achievements of each company.

4.3 TQM

Total Quality management has been traced back to the early 1920's when statistical theory was first applied to product quality control These ideas were then further developed with the Japanese motor company Toyota in the 40's which people may be more familiar with, the focus was widened from quality of products to quality of all issues within organisations, this was the origin of TQM (History of quality, http://www.bpir.com/total quality management history of tqm and business excellence bpir.com.html)..

4.4 ISO 9000

ISO 9000 began life as a set of inspection system documents in the 1950's for the US military. The documents went through a series of changes until 1987 when they were combined with standards proposed by other nations to form ISO 9001, ISO 9002, and ISO 9003 establishing three different levels of quality management systems. ISO 9000 is the generic name given to the family of standards and their purpose is to provide assurance of product regularity and compliance to specifications through better management control practices. The ISO 9000 standards have increasingly come to represent a commercial imperative that is difficult for organisations to avoid without also jeopardising client loyalty and market success (Frequently asked questions about ISO 9000 http://www.simplyquality.org/faq_history.htm).

4.5 JIT

As well as lean manufacturing and just in time technologies described above Japan and specifically Toyota can also be thanked for the success of supply chain management. The origins of the technique are thought to have come from the shipyards of Japan in the early 1950's. The technique then moved to the car manufacturing industry and specifically Toyota (Munteanu & Olteanu).

It is clear to see from these few examples that operations management has a long and successful history. There is no denying emulation of the techniques would benefit strategic and structural contingency for some organisations under the correct circumstances. We however are concerned with finding evidence of adoption of techniques to enhance legitimacy.

5. Evidence

Searching the current operations management literature for empirical evidence of legitimising technique appropriation proved to be mostly fruitless. A large deal of the literature talks of this phenomenon however few studies were performed to directly understand it. Therefore two forms of evidence are given, that which talks about the topic and that which talks about evidence of studies performed on the topic.

5.1 Indirect evidence

Choi and Eboch (Choi & Eboch, 1998) suggest in their 1998 paper that the link from implementation of TQM to operational plant performance is weak, alternatively however the link between TQM and customer satisfaction is strong. This could be interpreted as customers viewing TQM implementers as legitimate because they then report high customer satisfaction in surveys. This is in spite of the fact implementation had little effect on plant performance. Choi and Eboch (1998) go on to say that organisations do not implement TQM for the benefit of increased performance but rather for the need to increase customer satisfaction.

In 2007 Howard, Lewis, Meimczyk, and Brandon Jones (Howard, Lewis, Miemczyk, & Brandon Jones, 2007) performed a study on the adoption of a supplier park for an engine manufacturer in the United Kingdom. The paper is introduce stating that best practice among industry had recently moved to devoted sites such as supplier parks, where component suppliers move production to factories located close to assembly plants. Later in the paper Howard et al. (2007) describe the term bandwagon as "a diffusion process where organisations adopt innovations because of external pressure caused by the large number of organisations that have already adopted, or are considering adopting". This neo institutional argument is followed by suggestions that the pressures from bandwagon effects has caused some companies to adopt "new methods" even after they have assessed them and deemed them to be highly inefficient. This is evidence that the companies have adopted innovations for reasons that can only be explained by neo institutional arguments.

Dean and Snell (Dean Jr & Snell, 1996) offer indirect evidence of neo institutional arguments by concluding that the adoption of TQM, advanced manufacturing technologies and JIT are less related than expected to the strategic goals of the manufacturer under the economic rationality and strategic contingency paradigms. Dean and Snell (1996) conclude that "managers appear to feel considerable pressure to 'do something' about quality and JIT, whether this makes sense strategically or not" (1996) p, 464. The lack of economically rational reasoning here points towards institutional arguments.

According to Boiral (Boiral, 2003) ISO 9000 is being adopted by an increasing number of organisations around the world and is becoming a growing concern for decision makers who are often motivated to adopt ISO 9000 without really knowing its needs or implications for employees. The effects of ISO 9000 on performance improvement and quality management have been debated and little is known of how managers who are compelled to implement and maintain ISO 9000 perceive the standards (Boiral, 2003).

Anderson , Daly, and Johnson (Anderson, Daly, & Johnson, 1999) performed their 1999 study to determine whether firms obtained the ISO 9000 standards to satisfy government and customer demands who perceive the certification as a sign of legitimacy, or due to other factors to do with quality based competition and quality management. The results indicate that certification was not sought purely in response to regulatory needs, although Anderson et al. (1999) do state that these were significant explanatory variables, strong evidence did point towards managers adopting ISO 9000 to show external parties they have effective management practices, "Managers obtain certification as a means of providing credible signals of quality assurance to external parties" (Anderson et al., 1999) p, 41. Further, in the United States it was found that selling to original equipment manufacturers would increase the likelihood of a firm seeking certification. This shows evidence of the adoption of ISO 9000 due to coercive isomorphism influences. Anderson et al. conclude that their results indicate customer and regulatory compliance are insufficient explanations for the broad adoption of ISO 9000 (referring to the North American manufacturing firms which the study was conducted on).

Green supply chain management (GSCM) is an emerging environmental practice which allows manufacturers to increase revenue by improving their environmental image. The concept of GSCM is entirely motivated around the idea of organisations making an effort to be more environmentally friendly even though the logic behind this would not suggest improved efficiency . The presence of market and regulatory pressure (coercive and normative pressures respectively) influences organizations to improve environmental performance through the adoption of green purchasing practices. However, this will require additional investments, and weaken the overall economic performance of the practices when higher market pressures exist (Zhu & Sarkis, 2007). The study performed by Zhu and Sarkis (2007) on Chinese manufacturers using GSCM practices provides evidence against the institutional argument. They found that even though adoption levels were still relatively low the positive relationships to environmental and economic performance was significant (Zhu & Sarkis, 2007). It was also noted that Chinese manufacturers were experiencing increased environmental pressure to adopt GSCM practices, which is a far more intuitive argument and supports the institutional argument.

It is difficult to draw conclusions from the indirect evidence given above because it mostly relies on the interpretation of the individual assessing it, for example the task of this literature review is to find evidence of legitimising adoptions so conclusions drawn would likely skew in favour of that argument. Regardless of this some judgement are made. Firstly Choi and Eboch (1998) found that the link between implementation of TQM and improved plant performance is week, this directly agrees with hypothesis 1. This is then solidified by the statement that TQM is being implemented to increase customer satisfaction. Synthesising these arguments indicates that Choi and Eboch (1998) found evidence suggesting adopters of TQM want to increase customer satisfaction by implementing a practice that will not improve performance, the customer pressure (coercive isomorphism) for use of the particular innovation leads the organisations to adopt the innovation to be legitimate. Similar arguments can be made for the studies of Howard et al. (2007) as well as Dean and Snell (1996). In both studies they identify that companies were aware of the lack of increases in performance but introduced supplier parks and TQM respectively regardless. For Anderson et al. (1999) the interpretation of "credible public signal" determines which way the argument would go. If their idea of this statement is the public seeing ISO 9000 certified companies as legitimate then the adoption of ISO 9000 would indeed be a legitimating process. It should be noted that for all arguments so far hypothesis 2 has been in agreement with the given evidence. That is to say, the operations management practices under consideration have all had history of use which was shown in the brief backgrounds given earlier. The last indirect evidence however is a relatively new practice, and therefore hypothesis 2 does not hold. Although GSCM give efficiency gains (Zhu & Sarkis, 2007) it is also said that normative pressure is a motivator for adoption. It is not stated that there is coercive pressure from the public for more environmentally friendly practices to be used, this may be floor in the assumptions as this must play a role in the adoption of GSCM.

5.2 Direct evidence

The 2008 study by Wong and Boon itt (Wong & Boon itt, 2008) had the aim of exploring and understanding the effects of environmental uncertainty and neo institutional arguments on supply chain integration in the Thai automotive industry. Although the environmental uncertainty aspect of the study is off topic for this review it was integrated with the institutional norms argument and would compromise this analysis if left out, therefore it will be used in discussion alongside that of institutional norms. Wong and Boon itt (2008) first mentioned legitimacy when they said "for companies to survive, they may have to conform to institutional norms within their industries in order to increase their legitimacy to continue supply [of] their products to the industries"(p. 401). To perform their study a sample of seven auto manufacturers were interviewed and asked a series of identical questions shown in appendix A. The most interesting with respect to institutional arguments are questions four and five. In summary these two questions ask managers how influential the external environment is in effecting their effort to integrate supply chain management. The external environment is referred to as government agencies, suppliers, customers, or any other influential forces. They then asked for these factors to be ranked in significance of influence to integrate supply chain management.

Results of the questionnaire regarding environment uncertainty revealed all seven companies experienced some form of high uncertainty . High customer uncertainty being the most prevalent with six of the seven companies experiencing this, high technology uncertainty was also present in three of the companies. Comparing this information to companies also showing high levels of supply chain integration determined that companies with high levels of integration also have high levels of uncertainty. Turning next to institutional norms Wong and Boon tii (2008) state that the Thai automotive industry is subject to institutional norms created collectively by a number of sectors. The sectors include automakers, suppliers, local government, and possibly local culture. It is also said that the practice of supply chain management, among others, is a practice influenced by institutional norms. It was noted that some companies had a stronger influence than others, as an example is was suggest that larger companies or those that are deemed more important such as first tier suppliers were more successful in leading their suppliers to integrate a supply chain by developing information sharing techniques and providing training. Combing these findings Wong and Boon itt (2008) determined that institutional pressures to integrate supply chain management were more effective if environmental uncertainties were also present in the subject company.

Concluding Wong and Boon itt's (2008) study, the companies under investigation reached higher levels of supply chain integration if they were faced with high level of environmental uncertainty. Further, institutional norms increase the level of supply chain integration, especially when environmental uncertainty was also present.

The above concluding remarks proclaim that there is a definite increase in supply chain integration as the level of uncertainty rises and this is enhanced further if coercive and normative pressures are felt. Wong and Boon itt (2008) state themselves that the survival of companies could be determined by the legitimacy they can obtain, which prolongs contracts with suppliers and customers. Returning to hypothesis 1 and hypothesis 2 it can not be said both are true. Hypothesis 1 is not stated in the paper and can not be assumed. Hypothesis 2 holds however as supply chains originated post WW2. If simply thinking more logically about the outcomes of the findings the following could be said. The evidence shows an increase in supply chain integration is affected by institutional pressure, the institutional pressure is not lead by the need for improved efficiency. Therefore the increase in supply chain integration can only be explained by a need for increased legitimacy. The way Wong and Boon itt (2008) conducted their study, especially with regard to asking decision makers questions directly is the reason this peace of work is considered most valuable. It clearly defines the adoption of practices because of institutional forces pressuring increase in legitimacy, rather than proving legitimacy can be gained from adopting institutional practices. Looking at question 4 in Appendix A it can be seen that the topic has been narrowed down on and asked the hard questions.

6. Conclusion

It has long been argued that organisational strategy should drive the selection of technology, and the technological capability of an organisation should be the foundation for strategy. Dimaggio and Powell (1983) however, argue that change in organisations seems less and less driven by competition or by the need for efficiency. Instead decision makers are primarily motivated by attempts at legitimacy. This is one of three perspectives used to address the reasons why organisations select certain innovations to implement (Ketokivi & Schroeder, 2004) the others being strategic contingency and structural contingency. The aim of this literature was to find evidence of neo institutional arguments in the literature which pressured the adoption of practices or techniques in the field of operations management for reason of legitimacy.

There are many reasons why an organisation would wish to be considered legitimate but very little evidence can be found in the literature proving this. It was found that most of the existing literature tip toes around empirical evidence of organisations seeking legitimacy. This may be because firms would rather not have their customers know they are not producing goods at the lowest cost but merely copying those who do. Hypotheses were formed to judge the indirect evidence given, this let conclusion to be drawn which suggested this phenomenon is occurring in the field of operations management. The most useful study was that of the Thai automotive industry, where evidence was collected directly from the organisation managers, the results of the study strongly suggested some of the organisations were crumbling under normative pressure to be seen as legitimate. This was a survival technique where being legitimate ensured the continuation of business with customers.

There is a need for more work to be carried out in this area of operations management as a hole has been identified in the literature. Collecting more empirical evidence would give a better understanding of what managers perceive as valuable, that is efficiency or legitimacy, and possibly allow more for informed decisions to be made concerning practice adoption.

7. Appendices

7.1 Appendix A Interview questions

The following are the key questions asked during the interviews with the seven manufacturing companies.

1. Tell us about the products, position in the supply chain (tier), number of employees, ownership, major suppliers and customers of your company.

2. Tell us about the levels of uncertainty (in terms of low, medium, and high) your company facing for the following:

a. Supply uncertainty�for example uncertainty due to unreliable quality, unreliable lead time, unreliable supply information, or low level of flexibility provided by your most of your suppliers.

b. Customer uncertainty�for example uncertainty due to fluctuation in demand volume and product specification, changes in lead time requirements, or inaccurate demand forecast provided by the customers.

c. Technology uncertainty�for example uncertainty due to changes in product and process technology, complexity in product and process technology.

3. Tell us about the levels of integration (in terms of low, medium, and high) your company facing for the following:

a. Internal integration information system links across functions? Real time information sharing? Standardised means of communication? Processes are linked across functions? Relationships across functions?

b. Supply integration information system links across suppliers? Real time information sharing? Standardised means of communication? Processes are linked across suppliers? Long term relationships with suppliers?

c. Customer integration information system links across customers? Real time information sharing? Standardised means of communication? Processes are linked across customers? Long term relationships with customers?

4. To what extent the external environment such as government, supplier, customer, or other institutes are influencing your effort in integrating your supply chain?

a. Government�Any support, incentive or policy that promote supply chain integration?

b. Supplier�Any initiative, incentive or pressure to increase the level of integration?

c. Customers�Any initiative, incentive or pressure to increase the level of integration?

d. Other institutes�please specify and explain further.

5. Based on the following factors, select several most significant factors that have primarily lead to the level of integration of in your supply chain today?

a. Government support, incentive or policy.

b. Supplier initiative, incentive or pressure.

c. Customer initiative, incentive or pressure.

d. Others�please specify.

8. Reference list

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