Specialisation and division of labour

 Specialisation occurs when workers are assigned specific tasks within a production process. Workers will require less training to be an efficient worker. Therefore this will lead to an increase in labour productivity and firms will be able to benefit from economies of scale (lower average costs with increased output) and increased efficiency.

workers specialising in a repetitive job.

Examples of specialisation and division of labour

In the process of producing cars, there will be a high degree of labour specialisation.

• Some workers will design the cars
• Some will work on testing cars
• Some will work on marketing.
• Some workers will work on different sections of the assembly line. Their job may be highly specific such as putting on tyres e.t.c.

Specialisation within economies

Specialisation can also mean that individual countries can produce certain goods that they are best at producing and then exchange them with other countries.

The theory of comparative advantage states countries should specialise in producing those goods where they have a lower opportunity cost (relatively best at producing)

Specialisation requires trade. Specialisation and trade mean that countries that produce no oil can consume oil products and countries with large reserves of raw materials can export them in exchange for other goods that they need. This helps reduce the problem of scarcity in individual countries and enables countries PPF to shift outwards.

If there is increased trade there will also be increased competition. This means that domestic monopolies will now face competition from abroad, therefore, they have increased incentives to cut prices and be efficient.

Problems of specialisation in production

However, there are problems of specialisation.

• Firstly if workers do specific tasks, it may become boring and their productivity may fall as a result. High levels of specialisation could lead to possible diseconomies of scale.
• If an assembly line becomes highly specialised, production could be brought to a halt if there is a blockage in one area. It can be beneficial if there are more people specialised in different aspects.

Problems of specialisation in trade

• In terms of trade, poor countries may be encouraged to use up their non-renewable resources to sell to developing countries, therefore in the long term we could run out of non-renewable resources.
• Over specialisation in one country can lead to countries becoming over dependent on one particular commodity, e.g. if a developing country specialises in the production of a primary product their income may be adversely effected by bad weather conditions. Some primary products have quite a low income elasticity of demand. Therefore, they don’t benefit as much from economic growth.
• Critics of free trade argue that with increased specialisation there will be intense competition to cut costs and therefore wages will have to fall. However, this point is not necessarily true because firms can compete by producing capital-intensive goods with better technology.

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The specialization trap

 To understand the difference between an integrated and a fragmented operation, we’ll need to explain the concepts of the division of labor and specialization, which began in the past century.

5.1 - DIVISION OF LABOR

The division of labor is one of the hallmarks of capitalism. Before Henry Ford’s advancement of the assembly line for automobile production, cars were primarily produced by craftsmen or artisans. Every member on the team had a very good working knowledge of virtually all aspects of car manufacturing. With the assembly line, a small team of people designed the car and assembly process, while a larger team of unskilled workers built the cars.

Consequently, the Industrial Revolution brought specialization from the division of labor, by standardizing and allocating work, which brought increased productivity. This specialization, however, decreased self-sufficiency and people became increasingly interdependent on one another, leading to fragmented structures (silos), a limited sense of responsibility and a narrow scope of awareness.

The ‘division of labor’ is often attributed to Taylor, however, it was Adam Smith in An Inquiry into the Nature and Causes of the Wealth of Nations (1776) who had made a similar case one century earlier while Plato (424-347 BC) had introduced the concept. Plato believed that ‘only through specialization [..] can disunity between people be erased and a just state is established’. Although all three man made a similar case, their intended application of the concepts of specialization and division of labor differed: Plato described how to run a stable state, Smith on how to run an effective economy while Taylor used the concepts to run an efficient production line.

5.2 - SCIENTIFIC APPROACH

To illustrate the underlying scientific-rational management approach, often attributed to Frederick Windsor Taylor, we’ve created the following figure of the compartmentalized product assembly line:

5.3 - INDUSTRIAL EFFICIENCY

While Taylor sought to optimize industrial efficiency, ultimately leading to robots replacing much of human labor, few will realize that a similar scientific management approach to increase employee productivity has also been applied to today’s customer development processes.

To illustrate this, we’ve created a schematic illustration of the customer creation line (process):

5.4 - FRONTLINE PRODUCTIVITY

Are you confused to see how customers are passing by stationary frontline employees, on an imaginary conveyor belt, similar to how products, like cars, passed stationary factory workers for over a century?

This is in fact how most creative processes are organized today. And it should come at no surprise that this approach leads to employee disengagement, similar to how industrial compartmentalization led to disengaged factory workers.

Margaret Heffernan: “The problem is that efficiency works very well if you know exactly what you are going to need. But when the anomalous or the unexpected comes along then efficiency is no longer your friend ─ especially when the unexpected becomes the norm”. So how are we going to deal with the unexpected if we’re being controlled by algorithms that steer us towards a future that isn’t very likely to happen?”

HENRY FORD: 370% EMPLOYEE TURNOVER (!)

Apparently, Henry Ford did not believe factory workers needed to bother with the final product and would be more than happy to do repetitive work routinely. However, Ford underestimated the effect this had on people: employee turnover rose to 370%. In 1913 Ford hired more than 52.000 men to keep a workforce of only 14.000. Even today, the automotive industry’s track record on hiring and retention is ‘unacceptable’.

5.5 - SURVEILLANCE CAPITALISM

As suggested by Harvard professor and celebrated scholar Shahshan Zuboff there may be a third arrangement: the assembly line of surveillance capitalism. According to Zuboff, companies like Google and Facebook offer free access to their platforms and services in exchange for a user’s behavioral data which allows these companies to predict their future behavior. This data is then sold to advertisers as ‘qualified leads’ to market their products and services against.

"The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function."

~ F. Scott Fitzgerald

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