Entrepreneurship and Work in a Post-Fordist Organization: the Case of an Italian Industrial District

1. Different patterns of organization

In order to introduce you to the transformation of work and participation that has taken place in the North East of Italy, I think it’s best to start with a simple diagram. This describes the footwear production process (picture 1 - Patterns of development in footwear production).

In Italy three different kinds of organization may be found within a single technical process (in this case, footwear).

Each of the three production methods shown in the diagram produces the same product (or family of products), has the same technology, the same number of employees with identical skills, the same output at the end of the process (and also at any single stage of the process) and the same standard of productivity, cost and wage distribution.

The most important difference concerns the social agreement: the degree of participation in capital investment and income distribution.

In the first pattern (the integrated firm or fordist organization), market analysis, decision making, profit and capital investment are highly concentrated in one head office at the top of the value chain. Workers and bosses just attend to the top manager’s decisions and behave in relation to a contract formally sanctioning a low level of participation further down the chain in those stages of the process that are far from the final market line.

In the third pattern, though, (the industrial district or post-fordist organization) market analysis, product design, decision making, profit and investment are shared among a wide number of entrepreneurs.

In the other pattern of organization (the network enterprise) all these functions are performed by quasi-entrepreneurs (exclusive sub-contractors for one head enterprise), in a mixture of market and hierarchy (in this case participation of sub-contractors in the general strategy of the chain is limited to technical choices).

In the last decade the non-fordist mode of production has become predominant in North East Italy mainly for two reasons:

- it is suited to globalization, more flexible in the face of market failure, and able to promote a team game among entrepreneurs and workers at different levels, ensuring quicker innovation along the line, reducing risks, time to market and the cost of re-shaping the system in the event of external shocks;

- large amounts of capital are not required for each participant in the value chain to follow a successful path of development.

2. Why have post-fordist modes of production taken the leadership in Italy ?

The first organization seems rigid in the face of external shocks and unable, in Italy, to shift toward lean production or any other kind of risk-sharing social agreement.

In this mode of production a market failure affects the structure as a whole, with high costs in re-allocating human resources and capital goods. If the top manager fails in market forecasts and loses part of his market share to other competitors, the company as a whole goes bankrupt and employees and machinery have to be transferred elsewhere, with high economic and social costs.

On the contrary, the network enterprise and the industrial district have a capacity to absorb external shocks without evident costs. If the failure is the result of a mistake committed by the top manager of one of the district head enterprises, the only consequence to industrial suppliers (independent sub-contractors in this case) is their need to change the destination of their output. The industrial section of the chain is not affected by external shocks and its members are simply forced to shift from the failing head enterprise to another, quickly joining the winning team.

A fordist organization, however, can be established only with the help of big banks or by wealthy families. The total amount of capital needed to develop a new integrated company is high, while total profit is concentrated in very few hands.

In the post-fordist organization, on the other hand, each entrepreneur has to invest only what is required at his own stage of the process: it is easier for him to find the money, or a bank to provide a small loan. Meanwhile the total profits are shared among a large number of stock and stake holders.

Italy is a country typified by small banks and family capital. A post-fordist organization (in which risk, investment and profit are shared among a lot of people) is more than an opportunity, it is a compulsory course of development.

3. The rising of a new kind of entrepreneurship and work

We here briefly describe the rise of a new participative game in Italy: small entrepreneurs and skilled workers continuously shifting from one chain to another, from one job to another, concerned only with joining the winning team.

Of course this is possible only in a local context (the atmosphere of a district) that allows anyone to shift without dramatic changes in habits, friends, home, culture, etc., and this is possible only where the territory plays the special role of a good social integrator.

The local district, a term identifying the territory where a community of people and a population of small firms join together (see F.Pyke, W.Sengenberger, F.Cossentino or G.Becattini by ILO-Geneva, 1991 and 1997, or P.Krugman’s "Geography and Trade", 1991), is the environment in which a new kind of entrepreneurship and work can take off.

A small businessmen is, first of all, a member of the community and part of a team (not of a social class). He knows that his success depends on cooperation more than on competition, and for this reason he participates in local institutions and associations.

Workers also feel they belong to a system, not to a single company. They look at their own career as being the first step in a possible entrepreneurial upgrading process that starts with sub-contracting and carries on to head enterprise.

When we say workers in North East Italy we mean skilled workers. Skilled (and affluent) workers are a large part of the work force because of the prevalence of traditional sectors and the technical structure of the process which is still oriented towards custom-made products and a high level of customer service.

In this context, learning by doing is the standard way of improving human resources. But the ability to bargain individual know-how within the factory and in the territory is also an important part of the learning process.

4. What, then, is participation in these organizations we refer to as post-fordist (non-fordist) organizations ?

Although entrepreneurs believe in free market laws, individual interest and so on, and though they represent a single stage of the process (as sub-contractors), they naturally tend to cooperate in the final success of the chain.

In order to survive (as entrepreneurs) they are forced to understand, anticipate and influence the strategy of head companies; they must participate in the collective shift of the district towards a new challenge and use competition and cooperation as non-alternative means of growth.

Participation in this case is compulsory: an entrepreneur must take part in the collective game of the district or he may be pushed out and suffer social downgrading.

Up-grading and downgrading have no apparent consequences on the economic condition of people living in a district (there are no startling income differences between a small owner with 5 to 10 workers, a single handed entrepreneur and a skilled worker), but being identified as a loser may have dramatic consequences (emigration).

Workers, on the other hand, have a special opportunity on the district labor market: in a territory with hundreds of firms performing similar tasks, using similar machinery and techniques, and continually searching for new ideas and skills, they can choose their company.

The local labor market in a district is a perfect labor market (at least for skilled workers, but also offering good chances to others).

In this case participation comes from the awareness that a worker can control part of the output and measure the improvement of his own professional skills. Every day a worker can measure the value of his own personal capital, and participate in the design of new products and the re-shaping of the work process.

These special conditions are currently attracting worldwide interest in the Italian pattern of development and its economic and social success. They may represent the rise of a new pattern of development or what someone has recently called "The End of Work" (Rifkin).

Paolo Gurisatti