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analysis of the disadvantage of Lack of coordination between teams control in the team-based structure at SAAB and further support needed to improve Saab.(350)

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8

Integrating the Team-based
Structure in the Business Process:
The Case of Saab Training
Systems

Tomas Müllern

This chapter describes the radical, company-wide, organizational change
in Saab Training Systems from 1992 up until 1998. Saab Training Systems
is a high-tech company working in the defence industry, and it is char-
acterized as a prime mover in its industry when it comes to
organizational renewal. The company is a fully owned part of the Saab
group, but with a considerable degree of freedom. The Saab group is
made up of a number of companies developing and producing both mil-
itary and civil products. This case focuses on the change from a
traditional functional structure to a team-based structure with a number
of features relevant to the theme of this book: innovating forms of organ-
izing. Following a strategy of concentration on core competence, the
company, as a whole, is structured in a number of teams organized along
business processes. The chapter is theoretically based on literature on
team-based structures (and similar concepts) and the organization of
business processes. It argues that the literature on new forms of organ-
izing needs to focus more on team-based concepts and on how teams,
projects or other small groups can be adapted to the business process. We
have a fairly detailed knowledge of the transformation from functional to
divisional, M-form structures (Chandler, 1962). The case of Saab Training
Systems illustrates another form of radical transformation, from a

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functional principle of organizing to a process oriented structure organ-
ized in a number of teams. Even though the case cannot function as a role
model for company-wide change in bigger, and more complex organi-
zations, it shows how radical change ideas can be implemented in small
and medium-sized organizations, as well as in parts of bigger
organizations.

The chapter has eight sections: next, a literature review introduces a
number of important theoretical concepts to the case, followed by the
methodology used. The case study is then presented, first with a focus
on the industry and drivers for change, followed by a description of the
company and its business philosophy. Following this, the organizational
change is presented and analysed using concepts from the literature
review. The change process is then analysed with a focus on aspects of
learning and barriers to change. The chapter concludes with a sum-
mary of theoretical issues in the case.

Team-based Structures and New Forms of
Organizing

The literature on organizational forms and archetypes has for a long
time been troubled by the inadequacy of traditional structural forms
(functional, divisional and matrix structures) to capture the richness of
today’s organizational world. The literature has started to develop new
metaphors for at least some of the features of new and innovative forms
of organizing. Examples of such metaphors are networks (Miles and
Snow, 1986, 1992; Nohria and Eccles, 1992; Fulk and DeSanctis, 1995),
projectified organizations (Hastings, 1996; Turner, 1999), process organ-
ization (Fulk and DeSanctis, 1995), virtual organizations (DeSanctis and
Staudenmayer, 1998), and the cellular form (Miles et al., 1997). As argued
in many places in this book, any attempt to capture new forms of organ-
izing needs to adopt a holistic view of organizations, integrating
structures, processes and boundaries (Whittington et al., 1999b). The
results from the INNFORM project survey (see Fenton and Pettigrew,
Chapter 1 in this volume) indicate that finding the right balance between
different aspects is crucial for the success of the organization. This review,
primarily based on the structural and processual aspects, argues that a
team-based structure, arranged to support the business process, is a good
example of a new form of organizing (Jarvenpaa and Ives, 1994).

The literature on new and innovative forms of organizing, as well as
the human resource management literature, often stresses the use of
decentralized, group-based structures. Concepts like team-based struc-
tures (Keidel, 1990; Hirschhorn, 1991; DeMent, 1996; Hastings, 1996;
Baldwin et. al, 1997; McHugh, 1997; Sewell, 1998), project forms of
organizing (DeFillippi and Arthur, 1998; Lundin and Midler, 1998),

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organizational learning (Bouwen and Fry, 1991; Dodgson, 1993; Boudès
et al., 1998), are often used to describe the features of organizational
innovation. It is argued in this chapter that the team, as a basic building
block in the organization, is one promising starting point for under-
standing how organizations manage to combine horizontal and vertical
coordination and communication.

When reviewing the literature on team-based structures, one is faced
with a problem. As noted by a number of writers, the use of words like
team-based management, TQM, BPR (Business Process Reengineering),
virtual organizations and HRM, reflect fads and trends in the manage-
ment industry, rather than genuine innovation. The claims made in the
normative management literature are often totalizing (De Cock, 1998),
with a strong tendency to close the discourse using ideological argu-
ments (Sinclair, 1992). The empirical evidence is also weak, with few
valid propositions put forward and tested in the literature (Jaffe and
Scott, 1998). The perspective taken in many studies on team-based struc-
tures and other group-based structures is internal, focusing on the
group as such, instead of on the team-based structure as a key organiz-
ing principle for the entire organization (Campion et al., 1996; Little
and Madigan, 1997). The case described here is an example of how such
company-wide organizing can be implemented. It addresses a number
of theoretical issues connected to new forms of organizing in general,
and internal network organizations in particular.

The literature on team-based management and other forms of group-
based management has a marked intra-group perspective. The focus is
more on the group’s functioning and less on how teams can be organ-
ized to form bigger units. This also means that less emphasis is put on
the integration of teams. This chapter will argue that it is important to
describe and understand the arrangements for integrating teams. The
case of Saab Training Systems shows how this can be done on a com-
pany-wide scale.

A second marked trend in the literature is the focus on processual
and dynamic aspects. From an HRM perspective Mirvis (1997) argues
that leading companies focus on organizing for innovation by involving
employees, conducting training and mentoring programmes, using flex-
ible work arrangements and team-based work redesign. In the field of
project management it is often argued that companies organized by
projects are an important arena for innovation (Anderson and Larsson,
1998). The notion of the projectified society with an increasing number
of companies organized by projects, or other forms of temporary organ-
ization, draws attention to processes in companies (Lundin and
Sôderholm, 1998), how they organize innovation and the ongoing busi-
ness processes. Or to quote Hastings (1996:107): ‘The resulting
organization can be conceived of as a constantly changing kaleidoscope
of teams, forming, delivering work and dissolving as required.’

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A key question which is addressed later in the chapter is how a team-
based structure can be combined with a strong focus on processes in
order to achieve company-wide innovation. The case of Saab Training
Systems illustrates how a team-based structure is organized to follow
the core business processes of the firm, and how this has helped Saab to
re-engineer its operations, making it very successful in its industry
(defence). The new structure of the company can be described as a cross-
functional heterarchy (Maccoby, 1991), where teams are organized to
support key elements of the business process (the design phase of proj-
ects, contacts with customers, logistics, deliverance and innovation).
Miles and Snow (1995) use the metaphor of a sphere to describe an
organization with an ability to ‘rotate’ resources depending on market
demands by using internal project organization and external alliances to
build flexibility.

An important theoretical issue concerning team-based structures is
how company-wide coordination and communication is achieved. The
network organization, with its delayered and decentralized structure,
cannot rely on the hierarchy to provide coordination (Nohria and Eccles,
1992). Coordination is instead created by horizontal means (IT-solutions,
management-by-objectives, meetings, HR development, and by build-
ing a corporate culture). This confronts top management with a
dilemma – how to build on the strengths of team-based structures, in
terms of specialization, motivation and knowledge sharing (Little and
Madigan, 1997), at the same time as company-wide coordination is
achieved. The case presented below will show how Saab Training
Systems has tried to solve this dilemma.

This case will focus on three analytical themes. The first has to do
with the restructuring of the company – the transition from a tradi-
tional functional structure to the present team-based structure, and
towards a more project-oriented company in the future. A second theme
has to do with how to organize both innovation and an effective busi-
ness process. A third theme is that of the different processes in the
company (planning, business and innovation). The key research ques-
tions addressed in the chapter are:

� How can a team-based structure be organized to reflect the basic
business process in a company?

� What are the advantages and disadvantages of a team-based struc-
ture in a highly competitive environment?

Research Methods

This case was chosen to illustrate an innovative organizational design
that had also proved to be highly effective (in its industry). The Saab

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case has a number of interesting features. The company has built a con-
sistent team-based structure with a strong focus on horizontal principles
of organizing. Virtually the whole company is organized in teams for
different purposes. This is combined with a strong market orientation
involving many teams and a strong focus on knowledge management.
The team-based structure has recently been further developed by a
wider use of projects for innovation purposes. Needless to say, the com-
pany also has a high degree of decentralization and delayering.

This company is an excellent example of a company in transition, and
there are good opportunities to evaluate different organizational exper-
iments. It also provides a managable research unit (primarily in terms of
company size with 260 employees), even though the company is part of
a group with more than 5,000 employees. By choosing a medium-sized
company we had the opportunity to acquire considerable detail about
its features and organizing principles. A clear contribution of the Saab
case is the description of microprocesses of organizing, with a strong
focus on how the organization works operationally. The case study
method provides a good opportunity for developing a thorough under-
standing of the processes of organizational change within a company
(Yin, 1984; Bryman, 1989; Pettigrew, 1990).

In total, 14 interviews were conducted with respondents representing
the important parts of the company. Two of the key respondents were
interviewed three times over a one-year period. The selection of respon-
dents was made in dialogue with the Managing Director and the
Personnel Manager. Special care was taken to avoid biased respondents.
To avoid that we interviewed two persons representing each type of
function. The method used was qualitative, and focused on the respon-
dents’ descriptions, or stories, of their company and its radical change
processes (Reason and Hawkins, 1988).

All interviews were made using an interview pro-forma agreed upon
in the INNFORM research group. The interviews, lasting between one
and two hours, were tape-recorded and transcribed. Field notes were
also taken during interviews and informal discussions with the
Managing Director and Personnel Manager. The case description is also
based on secondary material (including company descriptions,
brochures and annual reports) and has also been thoroughly checked by
all respondents to ensure that it provides an accurate description of the
company.

Drivers for Change in the Defence Industry

Saab Training Systems started its operations in the mid-1940s producing
range equipment for military training purposes. In the mid-1970s the
company started the production of laser-based simulators, the most

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successful of the present business areas. The company is operating in
the defence industry (more specifically army material) which is charac-
terized by a number of broad trends.

Despite the fact that a number of wars are going on, the trend during
the 1980s to 1990s has been disarmament, with political ambitions to
reduce military budgets. The collapse of the Soviet Union and the end of
the cold war led to a drastic reduction of military spending at the same
time as the peace movement has been growing stronger.

The industry is also characterized by a severe overcapacity which has
forced it into extensive structural changes. One study of the aircraft
industry (Eriksson, 1995), describes the structural changes that took
place from the 1960s to the 1980s. One main trend is the rapid closure
and merger of companies. During the 1990s this trend accelerated and
complicated networks and alliances of subcontractors have emerged.
Eriksson points to military demand (with a pronounced arms reduction
in the Western world) as a clear driver for change (with mergers and
international collaborations as the obvious responses).

Compared to other industrial markets it is hard for this industry to
receive national support and it also has strong protectionist tendences.
This causes a political environment affecting the business process (nego-
tiations with states rather than other companies) and protracted
decision making. The ambition to reduce military budgets has resulted
in fewer repeat orders.

All these trends make the industry very different from more tradi-
tional consumer and industrial markets. The sales process too is very
different, with long and complicated negotiations with military and
political counterparts. Taken together, this makes it hard to predict
future sales. As a market leader in its niche, Saab Training Systems has
attained a strong position, with long-term contracts with major cus-
tomers in the US, UK, Germany, Norway and a number of other
countries. However, the company is very exposed to national policy
changes, economic crises and changing procurement policies. The deci-
sion taken by individual customers to buy training equipment can be
affected by a number of factors in society. In Saab Training Systems this
uncertainty is reflected in a flexible team-based structure that can
respond quickly to customer demands. The company also invests heav-
ily in developing new applications and exploring new markets.

The defence industry (as a whole) is often described as an industry in
deep crisis. The 1990s was marked by intensive restructuring of the
industry and a stronger reliance on strategic alliances. Since the new
military policy programme (adopted by the Swedish government in
1996) the Swedish defence industry has entered a number of interna-
tional collaborations. The Saab Group, for instance, has started a formal
collaboration with British Aerospace to market the JAS 39 Gripen fighter
in a global arena. The Eurofighter project is another example of the

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trend towards international collaboration (between the UK, Spain,
France and Germany). Mergers are numerous, with Boeing’s takeover of
McDonnel Douglas in the mid-1990s as the most spectacular example.
Saab Training Systems is obviously affected by the trends described
above, especially the competitive situation with reduced national budg-
ets for military spending. Their products, though, are special in a
number of ways. The company has so far not entered into any formal
collaborations with external partners (apart from the regular agents and
consultants used in the different countries where they sell their prod-
ucts, and subcontractors for production), either for marketing or for
technical purposes (product development and production).

The high degree of uncertainty in the industry, and the need for flex-
ibility in the marketplace, has nevertheless forced the company to react.
Instead of entering external alliances, the company has chosen a strategy
of concentrating on their core competence, with a focus on laser-based
simulation. The products are, in a sense, much more cost-effective for
the customer. The realistic simulation technique decreases the need for
using ‘sharp’ammunition and other equipment. The products are ‘light-
weight’ and easy to handle, reducing the need for advanced support
systems.

Another important reason for the success of the company is its close
contacts with customers. Not only marketing but members of different
product and application teams frequently visit the customers. This is
also a key aspect of organizational learning in the company.

The trends in the defence industry described above are clearly driv-
ers for the organizational change in Saab Training Systems. At the
beginning of the 1990s the company faced a very difficult situation with
productivity problems and a very turbulent market. As one team man-
ager stated: ‘The big focus we had during that period [1992–1993] was to
keep up with delivery times.’ The Managing Director similarly argued:
‘The purpose of the proposed change ideas was to strengthen our com-
petitiveness by a radical lowering of throughput times in both
development and production.’

To deal with this situation decisions were taken to focus on the com-
pany’s internal operations – how to gain efficiency by creating a more
flexible team-based structure that could be integrated with a more
process-oriented view of doing business – and concentrate on their core
competence (laser-based simulation).

Compared to the main part of the defence industry, Saab Training
Systems can be described as a prime mover when it comes to organiza-
tional renewal. While the trend in the industry has been to build
competetive strength by strategic alliances, Saab Training Systems has
focused on adding to its own strength. The flexible organizational
design is unique not only to the Saab group, but to the industry as a
whole: ‘We would not be competitive if we followed the rest of the

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industry. They tend to build in too much administration in the compa-
nies’ (team leader).

Saab Training Systems and the Saab Group

The Saab group consists of a number of independent companies (Saab,
Saab Aircraft, Saab Dynamics, Saab Ericsson Space, Ericsson Saab
Avionics, Saab Combitech and Saab Training Systems). The major prod-
uct in the Saab group is the fourth generation combat aircraft JAS 39
Gripen. During 1998 Saab adopted a new structure with five business
areas: Military Aerospace, Space, Training Systems, Commercial Aircraft
and Combitech. This chapter focuses on Saab Training Systems, a com-
pany that has been transformed from a traditional functional structure
in the early 1990s to a highly effective team-based structure. No other
part of the Saab group has made such a significant change in organiza-
tional design.

Saab Training Systems’ annual report for 1997 reports a turnover of
668 million Swedish kronor (£52 million sterling), with 260 employees at
the end of that year. The company has experienced rapid growth in
terms of turnover figures, from £15 million to £50 million from 1992 to
1997 (the number of employees during that period increased from 200 to
260). This rapid growth is partly due to the fact that the company
received two major international orders in 1992 (followed by a number
of successful deals in subsequent years). But it should also be stressed
that 1992 was the year when the new team-based structure was imple-
mented on a large scale.

Although the company is formally a part of the Saab Group (Saab
AB), it is generally acknowledged in the company that the links to
Linköping (where the corporate headquarters is situated) are loose. Saab
Training Systems is given a lot of operational freedom (both in financial
and organizational terms), with the Managing Director (Mr Hans
Robertsson) enjoying a very good reputation in the Saab group. The
formal corporate governance structure (with Saab Training Systems
being completely owned by Saab AB and the Investor group, the dom-
inant shareholder in Saab AB), does not reflect the strong informal
position which the company has in the group.

The Saab Group consists of fairly independent companies, with Saab
Training Systems holding a strong positition. The companies, though,
are interrelated in various ways. As well as sharing a number of central
administrative resources, there are also examples of transfers of know-
ledge between the companies. This transfer, though, should not be
overstressed, at least not at the group level. The technologies applied in
the companies differ, and it is generally agreed in the group that the
ideal of transferring knowledge has not reached its full potential.

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Transfer of knowledge is an issue that is frequently discussed as a
disadvantage of the team-based structure in Saab Training Systems. The
respondents argue that a lot of tacit knowledge is embedded in the
teams (and members of the teams) and the products they represent,
and that it has been problematic to transfer experience between teams.
One of the team leaders described this problem: ‘We keep files for all
documentation and descriptions, but they are not distributed among the
teams. If you don’t know what has been done before, and by whom, it’s
difficult to search for that information in the current filing system.’

Major Business Activities in Saab Training
Systems1

The company’s special niche is computer aided training equipment for
military purposes, using visual simulation of different types of terrain
and situations, and laser based simulation. The laser-based systems are
the core competence of the firm (with a number of patents showing the
high technical profile of the company and its employees). The laser sim-
ulator BT 46 is by far the largest product area in the company. A second
product area is virtual simulation. The Saab BT 61 is a graphics-based
simulator that uses authentic photographic environments and three-
dimensional moving targets for virtual simulation. The BT 61 accounts
for about 20 per cent of the company’s turnover. The company is also
involved in producing range equipment for live firing. Although this
was the founding product of the company in the 1940s, the product
area is a minor part of the company’s current operations.

The business idea was to give the customer state of the art training
systems using experience-based learning. Training Systems is a world
leader in its area of simulation equipment, based on laser technology for
aimed weapons. The largest markets for the present products are the
UK, USA and Germany. The company is truly international in its oper-
ations. More than 90 per cent of manufactured goods are exported.

The economic stability of the company is guaranteed by a number of
long-term contracts with a predictable planning horizon. These con-
tracts are reflected in the internal organizational structure in the form of
project teams for five of the major contracts: for example, a team for
adapting the laser simulator BT 46 to the US army’s Tank Weapons
Gunnery Simulation System (TWGSS) and to the British army’s Direct
Fire Weapon Effects Simulators (DFWES). In addition to these estab-
lished contracts (and negotiations for new contracts) the company also
invested a lot of resources in developing new applications without a
customer ordering a development project (the normal procedure in the
defence industry is that development is customer ordered). The inno-
vation process in the company thus bears more resemblance to that of

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‘normal’ manufacturing companies than to other companies in the
defence industry.

Company Philosophy

When visiting the company one is struck by a commonly held philoso-
phy. This goes back to a very strongly formulated vision by the
company’s Managing Director. A key concept often used by the
Managing Director is learning. A founding idea of the team-based struc-
ture is that the organization should reflect the learning ideals of the
products. Some of the key principles of learning in the company are
described below:

Experiential learning One important aspect of organizational learning is
to create opportunities for the individual to learn by doing. A significant
arena for feedback is direct contact with the customer: product and
application teams often meet the customer to discuss various issues
concerning the product. The team itself is also an important factor in the
feedback to individuals. The Managing Director stresses the fact that the
teams should have access to all necessary information and that work
results should be made visible and available. All respondents also men-
tion the weekly meeting between all team leaders and the management
team (including the Managing Director).

Cross-functional teams The teams are organized to be an environment
for individual learning. To achieve this goal, teams are organized
around objects (subsystems of the products) rather than functions. The
teams are in most cases cross-functional, bringing together people with
different competences. They are thus specialized in terms of products
but not in terms of competence.

Problem solving The product teams are responsible not only for pro-
duction but also for construction and product development. This
includes both developing products and production processes. A major
ambition is to solve problems in the group rather than individually,
thus encouraging creative thinking.

Information The explicit policy of the Managing Director is that infor-
mation should be free and available. Each team should have access to all
the information they need. The information issue also has another
aspect, the need to make work results visible and available. An ambition
in the company is to develop a system for storing knowledge in the
organization rather than with the individual. The company has a well
developed network of personal computers, giving the different teams

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access to the planning system LOTS, and to the control system. This
intranet is also frequently used for internal communication in Saab
Training Systems.

Individual growth Growth of individuals is a strong value in the com-
pany. Individuals are encouraged to try out new ideas and to take risks.
Individual growth is also stimulated by an emphasis on trial by error, to
use not only intellectual but also emotional capacities.

Accumulation of experience The Managing Director stresses that expe-
rience must be accumulated in the organization. This is achieved in a
number of ways. The products in themselves are obviously a key factor,
with a lot of knowledge stored in the current line of products. The busi-
ness process (described below) has a well developed logistic of the three
product areas (when they come to production). A clear ambition is also
to accumulate experience not only in the individual but also in the team
and the company in general.

The Transition from a Functional Structure to a
Team-based Structure

In the early 1990s the company faced a difficult situation around meet-
ing delivery times in both production and development. The relations
between production and development seemed to be especially crucial
for the overall effectiveness of the company: ‘We have identified the
difficulties with development issues, and creating new products with
insufficient resources’ (team leader). The company also felt a need to
respond more quickly to environmental changes and stressed the value
of communication between different parts of the company. The manag-
ing director of the company had for some time been troubled by the
ineffectiveness of the company. In 1992 he took the initiative to start an
experiment with a team-based organization. The underlying idea was to
create a more flexible structure: ‘All this requires that we develop new
flexible processes, communication patterns and a new organizational
structure’ (Managing …

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