Inside Contracting System - Essay Example

Inside Contract system Introduction The inside contracting system is a management concept whereby the management of a company provides floor space, machines, raw materials and all other necessities to a contractor who hires workers as per the requirement of the production process. Under the inside contracting system, the management makes the necessary arrangements for selling the finished goods. In other words, it can be stated that inside contracting is a system which facilitates in filling the gap between the raw materials and the finished goods by hired workers and not by the paid employees of a company. The contractors were given the necessary freedom to hire their own employees, supervise the work process. The contractors would receive a piece rate from the management for the completion of the job (Taylor, 2004). The contractors would pay the wages to the workers from the net income he receives from the management. Hence, the earnings of the contractor would be the difference between the wages paid to the workers and his sales to the company. The earnings would also include the day wages earned by the contractors. Under the inside contracting system, the single largest expense of a company is the payment made to the contractors. However, with the passage of time and the introduction of modern management concepts, it was seen that the workers under the inside contracting system procured greater autonomy and power. They were often seen to fight for higher wages and desired work condition as a union. Such unionized movement created pressure upon the capitalist who were seen to subdue themselves to movement so that production could be carried on (Buttrick, 1952). Discussion The internal contracting system was seen to remain highly generous towards the interests of the workers. This was seen to be especially true for crafts workers. Workers were able to gain such power because they fought for it. Overtime workers had developed group ethical codes and unionized themselves in such manners so that their interests and values can be fought for. The collective strength of workers and their knowledge were enough to provide them with such power. As the inside contracting system began gaining greater popularity, it was observed that industries began losing the collective strength between employees and managers (Eccles, 1981). The frequent agitation from the workers group and their lack of cooperation led to lesser implementation of managerial skills. This was seen to hamper the quality of the work and the ultimate production system. The struggle between the managers and the workers also dragged in the concepts of socialization and subjectivity which presently is more famous as organizational culture. In order to prevent workers from impacting the overall organizations work culture, it had become crucial to implement division of work in a stronger way. Labourers were required to be expropriated so as to make them believe that managers knew most appropriately how organizations were to be run and what the best was for the workers (Keen, 1981). Workers were required to be convinced that by handing over the powers of controlling the firm to managers and administrators, it would be possible to utilize resources more effectively. Workers however went on creating a more powerful class for themselves whereas, management efforts to develop an individualistic and divided work culture was not accepted (Mintzberg, 1989). Overtime it was observed that companies would hire contractors and leant the job form them and then went on to hiring foremen. The foremen were hired as salaried employees and once they were given suitable training, the contractors were removed from the factory. The management had gained the realization that employee’s knowledge was their main strength and hence when lesser opportunities were presented to them to learn the job, their powers could be significantly reduced as their knowledge could be controlled. Strategically managers started hiring workers or craftsmen who were specialized in only one or a few types of work and not the entire system of production. This made them dependent upon the management to coordinate the activities of different workers and sum them together. Therefore it can be stated that with an increased specialization of work, managers were able to control the autonomy provided to craftsmen (Englander, 1987). Further, with increased commercialization and the expansion of the markets in the nineteenth century, the demand for capital and consumer goods began to grow steadily. As a result, the number of contractors and workers required in industries began to grow in multiple folds. Increased number of contractors was required and management systems started to grow more complex. With the increased demand for products and services, managers began to feel the necessity to expropriate knowledge and maintain the inside contract system more strongly than before (Barney, 1995). However, changes in the size of organizations led to numerous changes in the inside contracting system as well. New and diverse organizational problems began to emerge. Issues of logistics and coordination began to grow alarmingly. Factories were composed of different workers and contractors who dealt with different production and manufacturing stages. The works of each worker groups under contractors was becoming increasingly dependent on each other (Stonebraker, 1981). It was not under a particular contractor or his tem of workers to control the activities of the organizations. Work started becoming more and more diversified and capital was being pulled into the management. Knowledge started to become more centralized. As specialization and division of work became more widespread, organizations were able to specialize, innovate, reduce costs and implement systems which supported mass production. The new inside contact system recognized that main management efficiency and success arise predominantly from the skilled craftsmen knowledge (Bigley and Roberts, 2001). The manufacturing of interchangeable parts and other production components by these highly skilled craftsmen made it possible for organization to manufacture quality products and also manufacture at a mass level. The procurement of sustainable resources and the ability to create innovative products and services was seen to depend upon the knowledge of such skilled workers or craftsmen (Green and Kolesar, 2004). Hence, managers began to concentrate more upon the knowledge and the skills of the workers and tried to capitalise upon the same for enhancing productivity and also to control the power vested in the hands of workers as a whole. However, from practical observation it was seen that the restrictive knowledge provided to workers prevented mass scale production. It was also observed that the manner in which the firm provided different types of processes were continuously in order to develop a large amount of assets and enhance the manner in which they procure efficient production. Overtime it was realised by the mangers of the nineteenth century that the issues related to production could be controlled innovation and manufacturing could be provided to the organization at the same pace (Rosenzweig, 1994). The development of the inside contract system has remained crucial in providing importance to the modern day skilled workers or craftsmen whose knowledge and talent are crucial for commercial advancement. The combination of talented craftsmen and contractors had emerged as the modern day scientists and creative experts. They had made managers realize that controlled specialization and creativity would facilitate solving the issues which are associated with inside contract systems. In comparison to the contractors and the skilled workers, managers that largely possessed a capitalistic approach, neither had the talent nor the ability to give an effect to efficiency (Christensen and Lægreid, 2001). The ability of a manger to make the business efficient remained dependent upon the abilities of the contractors and skilled workers. Workers contribution towards the development of organizations became crucial. The capital of the owners was seen to be of no use when the knowledge of the employees was not utilised effectively. However, the removal of the issues associated with the inside contracting system in the nineteenth century facilitated managers to reduce costs of operations and enhance the quality of management. Slowly as the system progressed, good relations between the management and the employees had emerged. It was understood with the progression of time that in order to be able to mange organizational issues it is essential that relationships between workers and managers are cordial and they remain supportive of each other’s needs. The basic demand of workers was that their pay must remain competitive and they should be provided a suitable environment to grow. On the other hand, management need was productivity and profits. Interests of both groups can be met if their existed adequate understanding (Kogut and Zander, 1992). Conclusion The inside contract system can be stated to be system which provides more power to the skilled craftsmen or workers and the contractors than the mangers. However, in the beginning of the twentieth century it was seen that skilled workers were provided important managerial posts. This raised competition and workers themselves realized that by restricting the knowledge to themselves they had better chances of attaining growth. Such thinking was beneficial for both the worker and the organization. The organization could enjoy the benefits arising out of specialization of knowledge whereby power would become restricted only to a few number of employees, instead of the entire organization. Alongside of this, managers were not required to worry about productivity as workers efforts automatically led to increased production. Reference list Barney, J. B., 1995. Looking inside for competitive advantage. The Academy of Management Executive, 9(4), pp. 49-61. Bigley, G. 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