Rationalization (economy)

In the economy, rationalization is all measures that are intended to contribute to increasing labor productivity , reducing overall costs and maximizing profits .

General

Since business administration has established itself as an independent individual science , dealing with rationalization has been of particular importance, because it involves the most fundamental measures for maintaining or increasing the profitability of a company, which ultimately serve to secure the existence of companies . For the purpose of increasing profitability, the still young business administration was looking for general principles that should serve companies in realizing potential for rationalization.

Particularly noteworthy is the pioneering work by Frederick Winslow Taylor ( Taylorism ) on the process control of work processes (1911), Friedrich von Gottl-Ottlilienfeld coined the term Fordism in 1923 as a counter-term to Taylorism , which took up questions of rationalization in mass production . Gottl-Ottlilienfeld is one of the co-founders of the German concept of rationalization (1929). Taylorism and Fordism were quickly seen as essential criteria for rationalization. In 1932, the American journalist Hubert Renfro Knickerbocker praised Germany as a pioneer of rationalization: “Today, according to the opinion of all expert observers in the whole world, not excluding the United States, there is not a single country that possesses a better industrial apparatus [than Germany ] ". Also Hermann Böhrs dealt with the rationalization, with the portion of the office rationalization (1958). Due to the diversity of the rationalization activities possible in a company, an unmanageable variety of different theoretical rationalization approaches quickly developed. The respective priorities of the rationalization activities went hand in hand with the current technical, market and social developments and are therefore subject to constant change.

content

The term rationalization has inconsistent content in today's specialist literature . The word component "rational" ( Latin to make reasonable ) is based on the rational principle . The primary evaluation parameters of the rationalization are the economically oriented profitability and the technically oriented productivity . In many cases, rationalization is also understood to mean the replacement of personnel with machines ( automation and mechanization through to industrial robots ). Due to the constant technological progress , the replacement of technically obsolete equipment with more efficient ones should be aimed for within the scope of rationalization ( rationalization investment ). In addition, organizational measures of the structural or procedural organization are also considered to be rationalization if work processes are optimized to improve efficiency . Rationalization is also present when production factors are ideally combined up to the Pareto optimum . A rationalization can also be seen in a change in the company production factor combination: “This change in the factor combination is called rationalization if the effort required by the new factor combination is smaller and this is chosen for the same yield . The difference between these two expenses is the rationalization effect ”.

species

Rationalizations can be systematized as follows:

• Technical rationalization : increasing use of machines and devices at the expense of the personnel , improved process engineering and more modern manufacturing processes , acceleration of throughput times or standardization .
• Economic rationalization : Process and organizational structure can help streamline administration ( flat hierarchy ) and production ( lean production ), help avoid parallel production and duplication of work, introduction of quality management systems , specialization through division of labor , outsourcing or a reduction in vertical integration . Organizational deficiencies (operational bottlenecks , undesirable idle phases with unnecessary idle costs ) can also be a reason for rationalization measures.
• Social rationalization takes place in human resources . Mention should be made of the optimization of leadership styles (“ meaningful leadership ”), training , advanced training , motivation , co-determination or profit sharing , but also downsizing and even mass layoffs .

These rationalization measures can be used in isolation or in combination, starting at one point , through a department , through a division , to the entire company. They cover areas such as structural and procedural organization, process technologies ( flexibility and automation ) or personnel ( qualifications , mobility , working time models , work motivation ). Likewise, potential for rationalization through production-oriented design , variant management or platform concepts must be used, which are hidden in the areas of research and development , construction and product design . Therefore, a broad understanding in terms of system rationalization is recommended (see also: Industrial Engineering ).

Rationalization as system rationalization

The importance of this comprehensive understanding of rationalization is essentially based on three aspects:

• In contrast to the traditional rationalization theory, which is often focused on the (production) area, the company as a whole is recorded with all its areas and design factors in input, output, personnel, technology and organization.
• Accordingly, the underlying understanding of economic efficiency must also be far more comprehensive than is usually the case. For this purpose, the system rationalization falls back on the complementary concept of system economy.
• System rationalization and innovation processes are in a complementary relationship and must always be managed simultaneously and equally by the company management. If this is not the case, the company runs the risk of “rationalizing itself to death”. That means: if the cost perspective dominates in the company to improve the competitive position, one rationalization project follows the other without recognizing the phenomenon of the “decreasing rationalization effect”. On the other hand, innovations in product and process could on the one hand fundamentally improve the market position and at the same time open up entirely new rationalization reserves.

System rationalization activities should not be carried out ad hoc , but should be systematically prepared as part of a corporate strategy. A basic weak point analysis of the influencing variables of the system economy can contribute to this. If the corresponding weak points are identified, individual rationalization measures must be developed. Numerous rationalization and design principles are available for solving problems.

Rationalization and economics

Rationalization can be the main cause of economic growth because it increases potential output . As a rule, it does not lead to rising unemployment for the economy as a whole , even if the keyword “rationalization” is often associated with it. In a hypothetical economy in which all companies reduce their costs by five percent through rationalization, either prices can decrease by 5% or profit distributions to shareholders or wages can increase by 5% or a similar amount without inflation . Both falling prices and rising wages and profit distributions have a correspondingly increasing effect on demand. A company that increases its productivity by 5% annually needs just as many employees as before when demand increases by 5% . In some branches of the economy , productivity can rise faster than demand (there are layoffs ), in others productivity growth is below the rise in demand (there are new hires ).

There are two different explanations for the question of why unemployment can still arise in the long term , namely either neoclassical unemployment or Keynesian unemployment .

aims

The increasing intensity of competition , caused by stagnating market development and globalization , made it clear that the

• Developing rationalization potential must be a permanent process
• Exclusive concentration on rationalization activities can have negative consequences for the company's development if necessary product innovations are neglected.

All rationalization measures are ultimately aimed at reducing costs and / or increasing revenues. The main goal of rationalization is therefore to improve profitability and thus restore or improve competitiveness . Rationalizations are necessary in order to achieve cost advantages that restore or improve the competitiveness of a company. Ultimately, the ultimate goal is the sensible , expedient organization of operational relationships under changing conditions.

See also

• Max Weber

literature

• J.öffelholtz: Economy and Profitability. In: E. Grochla, W. Wittmann (Hrsg.): Concise dictionary of business management. 4th edition. Volume 2, Stuttgart 1975, Sp. 4461-4467.
• H. Göltenboth: Cost reduction measures in the personnel, plant and material areas of an industrial company. Berlin u. a. 1972.
• W. Pfeiffer: Rationalization. In: W. Wittmann (Hrsg.): Concise dictionary of business administration. 5th edition. Stuttgart 1993, Col. 3939 ff.
• M. Schweitzer, H.-U. Küpper: Rationalization. In: E. Grochla, W. Wittmann (Hrsg.): Concise dictionary of business management. 4th edition. Volume 2, Stuttgart 1975, Sp. 3303-3311.
• Gina Fuhrich: Rationalization from below - workers as designers of operational rationalization at VW , in progress - Movement - History , Issue I / 2019, pp. 111–128.

Individual evidence

1. ^ Frederick Winslow Taylor: Principles of Scientific Management. 1911.
2. ^ Friedrich von Gottl-Ottlilienfeld: Economy and technology. In: Grundriss der Sozialökonomik II. 1923, pp. 134–164.
3. ^ Friedrich von Gottl-Ottlilienfeld: From the sense of rationalization. 1929, p. 7.
4. ↑ Hubert Renfro Knickerbocker: Is Europe coming up again? 1932, p. 186.
5. ^ Hermann Böhrs: Basic questions and methods of office rationalization. 1958.
6. ^ Lutz Fischer: Tax system and operational rationalization , 1975, p. 15.
7. ^ Albert Bronner: Handbook of rationalization. 2003, p. 2.
8. ^ Johannes Fettel: The operational rationalization effect - a production theory study. In: Journal for Business Administration . 1959, p. 327 ff.
9. ↑ Christian Hofstadler: Productivity in Construction Operations , 2014, p. 30 ff.
10. ^ W. Pfeiffer, E. Weiss, Ch. Strubl, M. Küßner: Systemwirtschaftlichkeit . 1999, p. 30 ff.
11. ↑ Wolfgang Lienemann: Alternative possibilities for energy policy , 1978, p. 233.