This column about Boeing points to a number of org theory ideas – organizational failure, network failure, supply chain failure, etc. – but it also strikes me as almost a caricature of the failure of the Babbage principle. As described in Braverman, economist Charles Babbage took Adam Smith’s writings on production benefits of the division of labor in the pin factory and turned them into a blueprint for cost benefits for the employer, with production quality assumed away.
Braverman quotes Babbage from 1832:
Now, although all these [benefits described by Smith] are important causes, and each has its influence on the result; yet it appears to me, that any explanation of the cheapness of manufactured articles, as consequent upon the division of labour, would be incomplete if the following principle were omitted to be stated.
That the master manufacturer, by dividing the work to be executed into different processes, each requiring different degrees of skill or force, can purchase exactly that precise quantity of both which is necessary for each process: whereas, if the whole work were executed by one workman, that person must possess sufficient skill to perform the most difficult, and sufficient strength to execute the most laborious, of the operations into which the art is divided.[emphasis in Braverman, p. 55]
Babbage’s idea was that disaggregating the production process allowed producers to purchase labor for each segment of the labor process at the lowest possible price, driving total costs down by what we would model as labor market price discrimination. This idea, which has dominated business practice, has clear implications for the development and preservation of skill. Braverman again, p. 57:
Translated into market terms, this means that the labor power capable of performing the process may be purchased more cheaply as dissociated elements than as a capacity integrated into a single worker. Applied first to the handicrafts and then to the mechanical crafts, Babbage’s principle eventually becomes the underlying force governing all forms of work in capitalist society, no matter in what setting or at what hierarchical level….The capitalist mode of production systematically destroys all-around skills where they exist, and brings into being skills and occupations that correspond to its needs.”
The main impact of this pattern (worsened by Taylorism) has been the centralization of knowledge lost by the firing of those with “all-around skills” in the management class, which has been used in part to justify their salaries. The interesting thing about the Boeing case is that major companies are now applying the Babbage principle even to this class, with significant consequences. From the Boeing piece, emphasis added:
But much of the blame belongs to the company’s quantum leap in farming out the design and manufacture of crucial components to suppliers around the nation and in foreign countries such as Italy, Sweden, China, and South Korea. Boeing’s dream was to save money. The reality is that it would have been cheaper to keep a lot of this work in-house.
Boeing’s goal, it seems, was to convert its storied aircraft factory near Seattle to a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits.
Rather than follow its old model of providing parts subcontractors with detailed blueprints created at home, Boeing gave suppliers less detailed specifications and required them to create their own blueprints.
Some then farmed out their engineering to their own subcontractors, Mike Bair, the former head of the 787 program, said at a meeting of business leaders in Washington state in 2007. That further reduced Boeing’s ability to supervise design and manufacture. At least one major supplier didn’t even have an engineering department when it won its contract, according to an analysis of the 787 by the European consortium Airbus, Boeing’s top global competitor.
The article later points out that Boeing retained only the lowest-cost components of the manufacturing process, and even farmed out the most lucrative annuity revenue streams (replacement parts). So it appears that – to keep immediate costs low – the company outsourced design, production, control, repair and future revenues.
Babbage on steroids.