MGMT 3100 Human resource Management

Performance Management and Innovative Human Resource Training Through Flexible ProductionSystems Aimed at Enhancing the Competitiveness of SMEs 2 9 Performance Management and Innovative Human Resource Training Through Flexible Production Systems Aimed at Enhancing the Competitiveness of SMEs © 2015 IUP. All Rights Reserved. Nunzio Casalino 1, Maurizio Cavallari 2, Marco De Marco 3, Maria Ferrara 4, Mauro Gatti 5 and Cecilia Rossignoli 6 In the current knowledge economy, companies need to develop competitive advantages based on an adequate and intensive use of innovation processes and Information and Communication Technology (ICT) that are becoming essential elements of business success in today’s European market. The purpose of this paper is to introduce and discuss the benefits of online training on automation and innovation fields and try to explain their organizational impact on Small and Medium-Sized Enterpris es (SMEs). Besides, it tries to understand the main barriers to SMEs with respect to the realization of their innovative potential and their capacity to improve internal processes by ICT adoption and organizati onal change. They are becoming particularly important for achieving greater productivity, lower operation al costs, and higher revenues (usually characterized by reduced access to external finance, unavailabil ity of wider distribution channels, low internationalization, etc.). The goal of the paper is also to synth esize the experience and the benefits of e-learning and of a specific professional environment in the training process. The described project provides training contents to enhance the participants’ background an d some innovative simulations to improve effectively the specialized knowledge of the employees on ind ustrial automation systems.

1 Associate Professor of Business Organization, Università LUISS Guido Carli, Rome, Italy; and is the corresponding author. E -mail: [email protected] 2 Ad j u n c t P r o f e s s o r o f B u s i n e s s O r ga n i z a t i o n , U n i v e r s i t à C a t t o li c a d e l Sa c r o C u o r e , M i la n , I t a ly.

E-mail: [email protected] 3 Full Professor of Business Organization, Uninettuno, Rome, Italy. E-mail: marco.demarco@uninettunoun iversity.net 4 Fu ll P r o f e s s or o f B u s in e s s O r ga n i z a t i on , U n i v e rs i t à d e gli St u d i d i N a p o li “ Pa r t he n o p e ” , Na p le s , It a l y. E-mail: [email protected] 5 Full Professor of Business Organization, Università La Sapienza, Rome, Italy. E -mail: mauro.gatti@un iroma1.it 6 Full Professor of Business Organization, Università di Verona, Verona, Italy. E -mail: cecilia.rossig [email protected] Introduction Information and Communication Technology (ICT), automation and robotics are changing the manufacturing processes and industrial competitiveness. In parallel, educational institutions are also integrating several aspects of information systems, logistics, mechanics, electronic processes (mechatronics) and technologies to improve their business courses. The IUP Journal of Knowledge Management, Vol. XIII, No. 4, 2015 3 0 This element is especially relevant for Small and Medium-Sized Enterprises (SMEs), whose survival depends, among other factors, on the use they make of ICTs to develop new organizational models, compete in new markets or enhance their internal and external communication relationships. Nevertheless, many small enterprises have rather conservative approaches toward new technologies and thereby miss many opportunities of utilizing improved technologies (Armenia et al ., 2008). SMEs need highly qualified staff with strong competencies for operating new industrial machines and managing sophisticated production processes (Casalino et al ., 2012). The project results analyzed in this paper can help managers and trainers to address and go over the problem of low knowledge about possibilities offered by flexible industrial automation systems. The project, which will be described in depth later, adapts and develops an innovative approach and learning contents (Uskov and Casalino, 2012) targeted specifically at SMEs to qualify managers and staff on industrial automation systems. There have been significant debates about the impact of new ICTs on economic performance (Jin, 1999) and competitiveness in general, and on productivity, efficiency, and innovation in particular (Metallo et al ., 2012). The diffusion of automation can produce new opportunities to SMEs. It overcomes the concept of traditional organization and emphasizes the interdependence between the organization of jobs and technology (Fontana and Caroli, 2013). Notably, in seeking an explanation for the acceleration in productivity and economic growth experienced in many industrialized countries, many economists have looked at the development, application, and utilization of ICT as a critical success factor. Hence, at the firm level, the expectations are of greater efficiency, lower costs, and access to larger and new markets, while governments see the application and use of ICT as generating higher productivity and competitiveness (Agrifoglio et al ., 2013). This paper provides an analysis of automation and innovation fields and tries to explain their organizational impact on SMEs.

Beside s, it tries to understand the main barriers to SMEs with respect to the realization of their innovative potential and their capacity to create employment (reduced access to external finance, unavailability of wider distribution channels, low internationalization, etc.). Moreover, as first argued by New Growth Theory (Romer, 1986), the capacity of continuous innovation has become a key factor in the global competition of high-income regions in order to acquire additional factors of production and the new value-adding processes which are necessary to keep an economy on a sustainable growth path (Ricciardi and De Marco, 2012). SMEs seem to be the ideal vehicle to promote both goals—sustainable innovation-based economic growth and employment creation—without trade -offs, given, as frequently assumed, the high flexibility as well as the relatively labor-intensive mode of production in SMEs. However, the issue as to how realistic these expectations are is anything but resolved. Despite the experience with a different number of SME promotion programs, it is still debated as to which specific policy measure is really suitable to guarantee undistorted competition by compensating firm-size specific disadvantages, such as the SMEs’ restricted access to public resources.

Organizational Impact of ICT and Automation: Reason for the Change The relevant literature has traditionally suggested different perspectives or aspects of ICTs that must be considered in the study (Brady et al ., 2002). From an economic and management Performance Management and Innovative Human Resource Training Through Flexible ProductionSystems Aimed at Enhancing the Competitiveness of SMEs 3 1 viewpoint, ICTs have been regarded as: (i) a social construction; (ii) an information provider; (iii) an infrastructure—hardware and software; and (iv) a business process and system. From a marketing point of view, ICTs have also been viewed as: (i) a variety of separate applications (Internet, Databases, PowerPoint); (ii) a marketing channel; (iii) a communication/ promotional medium; (iv) a marketing technique; and (v) a tool for relationship marketing.

ICT adoption and organizational change are becoming essential for achieving greater industry productivity, lower operational costs, and higher revenues. The close correlation between these dimensions of improved economic performance from ICT and organizational change corresponds well with the findings from other studies on the impact of ICT on firm performance. Therefore, ICTs can be viewed as a collective term for a wide range of software, hardware, telecommunications and information management techniques, applications and devices, and are used to create, produce, analyze, process, package, distribute, receive, retrieve, store and transform information (Barba-Sánchez et al ., 2007). It has thus often been argued that the effective utilization of ICT requires more horizontal organizational structures with greater levels of responsibility for the overall coordination of work placed on the individual employee. It also requires the implementation of clear functional descriptions of tasks. All this often requires a complete reshaping of the organizational structure of the firm where all aspects of the organizational development are consequently given attention. Hence, it is important to note that the firms are going through a period of rapid modernization, emphasizing improved production processes and flexible organizations that can address the needs of the market, as part of transformation of the socioeconomic fabric to a market- driven economy. This may in part explain why ICT is combined with other factors, such as new marketing strategies and organizational change. Today, there is a strong need for collecting more revealing data on ICT utilization and its impact on SMEs, for more rigorous analysis of how ICT investment and use affects innovation (Iannotta et al ., 2014), and for better u nderstanding h o w th is can translate into p roductivity increasing and e nh ancing competitiveness (Figure 1). How to correlate SMEs in the internationalization processes or whether they only function as suppliers in global value chains, dominated by large - scale transnational enterprises, is an open que stion. Without doubt, the current wave of internationalization is accelerating the diffusion of innovation across industries (Kaplan, Figure 1: Sub-Goals of a Company and Efficiency Indicators Goal of the Company Efficiency of Coordination Efficiency of Motivation Sub-Goals Efficiency of Process Efficiency of Resources Efficiency of Delegation Efficiency of Market The IUP Journal of Knowledge Management, Vol. XIII, No. 4, 2015 3 2 1999). Yet it is unclear whether SMEs are driven by globalization or whether they are a driving force in this process. It is clear from our study that ICT utilization is already having an impact on the economic performance of firms. This is reflected in the findings on the impact of ICT on economic performance, where it is evident that ICT is a substantial contributor to productivity, profitability, and growth. Accordingly, a new marketing strategy is particularly relevant for translating the introduction and use of ICT into improvement of profitability (De Marco and Sorrentino, 2007). This is mainly because the use of ICT together with new marketing initiatives enables firms to strengthen their position in existing markets or enter new markets, thereby improving profitability. ICT is particularly important for lowering operational costs and increasing revenue. In addition to identifying the immediate impact of ICT on the economic performance of SMEs, it is possible to identify how firms use ICT to improve their future performance, namely, through innovation. ICT is only a minor facilitator of innovation; it only becomes powerful in combination with a number of other complementary factors.

The main factors contributing to innovation in SMEs are: • Changes in salary structure; • Training of staff; • Capital investment in equipment; • Organizational change; and • New market strategy. In most of the sectors surveyed, ICT contributes more to process innovation than to product and relational innovation. The use of ICT is thus mainly for changes in production processes within the organization, rather than the development of new products or the furthering of relationships, especially with suppliers. It was found that relatively fewer firms report decreasing costs because of ICT (Rossignoli, 2004). Automation is the adoption of control systems and ICT to reduce the need for human work in the production of goods and services. In the scope of industrialization, automation is a step beyond mechanization. While mechanization provides human operators with machinery to assist them with the muscular requirements of work, automation greatly decreases the need for human sensory and mental requirements as well. Automation plays an increasingly important role in the world economy and in daily experience. Automation has had a notable impact on a wide range of industries beyond manufacturing (where it began). In general, automation has been responsible for the shift in the world economy from industrial jobs to service jobs in the 20 th and 21 st centuries. The result has been a rapidly expanding range of applications and human activities. Design and manufacturing of products are important for information technology industry and can assist in the design, implementation, and monitoring of control systems. Automated teller machines have reduced the need for bank visits to obtain cash and carry out transactions (De Marco, 2004). Engineers now can have numerical control over automated devices. Computer-Aided Technologies (or CAx) now serve the basis for mathematical and organizational tools used to create complex systems. Notable examples of CAx include Performance Management and Innovative Human Resource Training Through Flexible ProductionSystems Aimed at Enhancing the Competitiveness of SMEs 3 3 Computer-Aided Design (CAD software) and Computer-Aided Manufacturing (CAM software). The improved design, analysis, and manufacture of products enabled by CAx have been beneficial for industry information technology, together with industrial machinery and processes; and can assist in the design, implementation, and monitoring of control systems.

One example of an industrial control system is a Programmable Logic Controller (PLC).

PLCs are specialized hardened computers, which are frequently used to synchronize the flow of inputs from (physical) sensors and events with the flow of outputs to actuators and events.

Human Machine Interface (HMI) or Computer Human Interface (CHI), formerly known as man-machine interface, is usually employed to communicate with PLCs and other computers.

Service personnel who monitor and control through HMIs can be called by different names.

In industrial process and manufacturing environments, they are called operators or something similar. Some automation tools that could be adopted in SMEs are: • ABNN – Artificial Business Neural Networks; • DCS – Distributed Control Systems; • HMI – Human Machine Interface; • SCADA – Supervisory Control and Data Acquisition; • PLC – Programmable Logic Controllers; • PAC – Programmable Automation Controllers; • Motion Control Systems; and • Advanced Manufacturing Systems. Innovation and Technology Transfer Joseph Schumpeter is often mentioned as the first economist to have drawn attention to the importance of innovation (Johannessen et al. , 1999), defining five types of innovation ranging from introducing a new product to changes in industrial organization. The Oslo Manual provided two more technical definitions, but still it appears that “innovation” is not easy to define precisely. In 1999, in his keynote speech, Mills gave some simple definitions: • Science: how to understand things; • Technology: how to do things; • Management: how to get things done; • Creation: bringing into existence; • Invention: devising something new or a new way to do things; and • Innovation: turning an idea into income. According to David Archibald, innovation is a science and explains what innovation and creativity mean by these simple formulas: Creativity = Idea + Action By this, Archibald means that the “idea” is just the beginning to create something. People must do something to bring the idea and create something. The IUP Journal of Knowledge Management, Vol. XIII, No. 4, 2015 3 4 Innovation = Creativity + Productivity In reality, the sequence is: get an idea, test or prototype it, produce a finished item and bring it into use. In the case of artists, this corresponds to: get inspiration, sketch it, put it down on canvas, and finally exhibit the work. For many businesses, the ultimate goal is the idea to produce profit. In this case, innovation must come from ideas that lead to sales. Profitable Innovation = Innovation + Marketing The innovation process is a combination of various activities starting from research but including design, market investigation, process development, and may include organizational restructuring, employee development, etc. Innovation implies creativity and dynamism that will benefit the company and result in a higher standard of living. However, as a conclusion, it must be kept in mind that measurement of innovation is very difficult. Technology transfer is the process by which existing knowledge and capabilities developed under public R&D funding are used to fulfill public and private needs. Besides, an organization must become a learning organization and there must be a constant and unstinting market focus. Market and learning orientation are less formal, less structured, and less sequential in SMEs. According to Baker and Sinkula (1999), learning orientation “is a mechanism that directly affects a firm’s ability to challenge old assumptions about market and how a firm should be organized to address it”. SMEs have a natural advantage in that it is easier to create a learning environment in smaller organizations. Specifically, organizational learning is a workplace learning, which is a lower-level learning style involving the use of existing knowledge to enhance operational efficiency in SMEs. To expand, a learning organization can be described as possessing: • Commitment to learning: The degree to which an organization values and promotes a learning culture by believing that learning is key to improvement and competitive advantage; • Shared vision: An organization-wide focus on learning or direction of learning that is evident across all levels of an organization; • Open-mindedness: Willingness to critically evaluate the organization’s operational routine and to accept new ideas by continually judging the quality of decisions and activities taken and perceptions about marketplace; and • Intra- organizational knowledge sharing: Collective beliefs or behavioral routines related to the spread of learning among different units within the organization by having mechanisms for sharing lessons learned in organizational activities from department to department (unit to unit, team to team). Organizational Structure and Human Resources A new flexible production system involves many changes in firm’s organization chart with the increasing use of automation, often pointing out the problem of the lack of trained staff Performance Management and Innovative Human Resource Training Through Flexible ProductionSystems Aimed at Enhancing the Competitiveness of SMEs 3 5 (Rossignoli, 2009). Indeed, very few workers are able to actively practice with new technology.

The structure has to be modern and efficient and its staff have to be extremely skilled. Staff has to use the best technology available now in the market (PLC, systems control, numerical controls, systems of automation distributed, industrial PC, barriers of protection). The business structure must integrate and elaborate information coming from different sources (Kessler and Chakrabarti, 1997). As regards the different business functions, they must be shaped so that results are accessible from this information. It is necessary to improve competences to allow solutions of personalized automation. We analyze in detail the main competences. The technical person must also take care of the management of the cars related to specific phases of the production trial and must verify the conformity of the result in comparison to the standards affecting the necessary regulations and intervening on possible anomalies. The technical staff must be able to use the principal programming languages and application, developing the ability to work in team and for objective, using different methodologies, as for instance, the project management. The principal occupations are assembled in the technical offices and in the centers of research and development. Some unit profiles are: • Th e techni ci an , in co llaboratio n with administrative pe rso nne l, de ve lop s experimental researches using all necessary competences for carrying out the activities; • The engineer of trial is the person who knows the trial that must be automated. In most cases, he coincides with the planner (mechanic) head; • The electric planner designs the structure of the electric system and the different uses of the production trial; • The expert of field defines typology, position and technical specifications of several sensors and essential actuators to check and watch the trial; • The planner of automatic controls is traditionally also an expert of measures and covers the necessary competences of an expert of field. They define the control system architecture and the specifications; • The person responsible for maintenance is another figure whose role is increasingly growing; and • The person of maintenance of automation must know how to distinguish between corrective maintenance and improved maintenance. Then the role of management is to improve the quality of the products and the flexibility, to reduce the time of production, to adjust laws and rules and to improve the use of the available resources. This is possible by means of suitable choices of investment, actions of marketing and naturally through an adjusted plan of production. This last phase must be managed through a fit allocation of human resources and with the control of the productive trials making use of automation. As regards the control of the production trials, the principal problem is the quick obsolescence of the firm’s products. The solution is therefore the use of The IUP Journal of Knowledge Management, Vol. XIII, No. 4, 2015 3 6 flexible systems of production that develop, in an automatic way, different products. Therefore, we can distinguish four types of competences to recognize industrial automation: 1. Methodological competences: The figures have technical competences, tied to the routine of automation; 2. Technological competences: Methodological competences are realized in solutions implemented through technologies, therefore technological competences are necessary for those who are working with industrial automation; 3. Competences of trial: Automation requires knowledge on the trials to automatize.

Rather, experience shows that the automation of a productive trial often induces to find formal and general descriptions of the same process; and 4. Technological complexity: Technological complexity should not be too far ahead of scientific understanding as it would limit the commercial viability of the innovation by being too sophisticated for the end-user. The Research Project SMEs are generally resistant not only to training but also to other forms of wider participation.

Generally, SMEs also engage in less management development activities than larger firms.

Managers in SMEs are much less likely to have formal appraisals or discussions on their training needs. SMEs must still provide the ability for managers to learn by experience, bringing their knowledge, skills and values into the workplace and putting them into practice.

Inevitably, these resources are limited and sometimes inadequate (Ward, 1996). This can be potentially harmful for an organization, sacrificing the strength and consistency of its culture to achieve short-term gain. The AutoMatic project, titled “Development of Curriculum and Innovative Training Tools for Industrial Automation Systems for People Employed in SMEs” addresses the problem of low or missing overview about possibilities offered by industrial automation systems. It develops approaches and learning materials directed specifically to SMEs to qualify staff in terms of industrial automation systems. AutoMatic has been selected for co -financing under the Lifelong Learning Program, Leonardo da Vinci, Transfer of Innovation Projects (2009-1BG1-LEO05-01640-24 months). The project is available on www.automatic-project.eu. The project has developed an innovative training approach, e -learning platform, several learning contents and specific simulation tools in the field of industrial automation systems, which are applicable to European SMEs. AutoMatic builds upon an existing approach developed in the pilot project “International Curricula of Mechatronics and Training Materials for Initial Vocational Training” for vocational schools developed by Tallinn Technical University, Estonia. The project consortium is composed of (Figure 2): • Gabrovo Technical University, Bulgaria, www.tugab.bg (project promoter); • ECQ – European Center for Quality, Sofia, Bulgaria, www.ecq-bg.com (project coordinator); Performance Management and Innovative Human Resource Training Through Flexible ProductionSystems Aimed at Enhancing the Competitiveness of SMEs 3 7 • Tallinn University of Technology, Estonia, www.ttu.ee; • LUISS Guido Carli University, Rome, Italy, www.luiss.it; and • Multidisciplinary European Research Institute Graz, Austria, www.merig.org. Target groups are practitioners in SMEs who intend to get an introduction and overview about industrial automation processes and are the main target group of AutoMatic. The project also addresses students in vocational education as end users as well as teachers and trainers as intermediates. The developed products can support SME employees who want to improve their qualification or requalify and need to increase their flexibility with respect to market demands and successful realization on the common labor market. Between the results achieved, interactive training tools (Yamasaki and Baba, 1996) for industrial automation systems are developed. More specifically, innovative curricula and the following five training modules are targeted at SME management and staff: 1. ICT-based means for automation and innovation; 2. Sensors in industrial automation; 3. Actuators in industrial automation; 4. Application of PLC in industrial automation; and 5. Industrial networks and interfaces in automation systems. In the AutoMatic platform, a “virtual teacher” was integrated that speaks slowly, with a clear voice and a perfect intonation. Therefore, AutoMatic proposes an innovative approach for the training with a virtual teacher that holds the lessons, so that the distance training is combined with a similar direct contact. AutoMatic platform also offers auto - evaluation forms through which the learners can verify the acquired knowledge level. Such forms, at the Figure 2: The Project Website The IUP Journal of Knowledge Management, Vol. XIII, No. 4, 2015 3 8 end of every subject, allow the worker to immediately verify the acquired knowledge through the portal. Four different sections are deve loped for each training module (Figure 3): 1. Training courses; 2. Exercises; 3. Self-assessment; and 4. Links and references. The learning tools and materials are available in five languages: English, Bulgarian, Estonian, German and Italian. The learning tools and materials are available online, on DVD and on traditional booklets. Some main results achieved (Casalino, 2009) are: • Increased flexibility of SME employees who want to improve their qualification; • Increased motivation of target groups and their commitment for life -long learning and career planning; and • A good impact on the quality of vocational training and international cooperation in the area of industrial automation systems by providing time - saving and user- friendly approaches. Conclusion Studies on the process of information technology acquisition clearly show that these systems go through several evolutionary stages. During this development, the priority in order to succeed does not seem to be tied only to the acquisition process, but mainly to the paths of learning and organizational change. Experience suggests that these paths should be designed and carefully managed in order to allow the acquisition and effective use of ICT applications by the users and the whole enterprise. The traditional methodology for training, in fact, has failed to furnish a suitable medium in the professional training field, because of dynamic and Figure 3: An Exercise for the Self-Evaluation in the Field of Business Organization Performance Management and Innovative Human Resource Training Through Flexible ProductionSystems Aimed at Enhancing the Competitiveness of SMEs 3 9 continuous changes in the ICT sector and the increasing demand for more and more knowledge in the quality field (Casalino and D’Atri, 2005). AutoMatic can contribute to the success of the SMEs. The strategy is based on the creation of a system for the training that combines the distance learning objectives with the traditional benefits; therefore, the two different methodologies are integrated. In fact, on the one side, the distance statement is a comfortable method for the training of a vast entourage of people within automation, but on the other hand, many people does not believe in the effectiveness of such method of statement (Sorrentino and De Marco, 2010) because of the lack of a teacher in the method that mostly involves trainees. This research project includes the analysis of some indicators and specific key aspects that regard the current situation of automation and innovation culture in the European SMEs. These are: • What is the current situation of quality aspects dissemination through online courses? • How are the main models used and applied? • What role can national agencies or institutions, such as universities, have in the diffusion of innovation culture or the implementation of automation for SMEs through both traditional and web-based learning? • How do organizational and cultural specificities affect automation implementation? The importance of automation is increasing due to the fact that impediments such as lack of quality control and assurance systems, lack of accreditation and certification procedures, and poor conformity marks are still widespread (Casalino et al ., 2013). Such impediments are considered as major potential and unnecessary technical barriers to trade, especially concerning international competitiveness and globalization. It is important to underline that SMEs have to meet the challenges of globalization and the new knowledge - driven economy aims.

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