Inside the Enterprise
The previous chapters have discussed the processes of reform primarily at the national level. Here the focus is on the enterprise as the unit of analysis, the processes of change within it, and, especially, the interaction between what happens in the external environment and developments within the enterprise. In the centrally planned economy the significance of the enterprise had two main dimensions. First, the focus of management 'was mainly related to the macro level' and changes within the enterprise 'reflected the external requirements of the administrative-cum-political system rather than the problems associated with the functioning of the enterprise itself' (Federowicz 1994: 95). Secondly, in the one-party state the enterprise was the 'constitutive institution of the new socialist society' ( Szczpanski, quoted in Federowicz 1994: 124). It provided the full employment which was the essence of socialist society together with rewards through a whole range of social and welfare services as well as earnings. The enterprise was the base of the party organization with its membership founded on the workplace and not on the locality.
Under the system of central planning the relationship of enterprises to their customers and suppliers was determined mainly by ministries and there was substantial central control over prices and wages. There was significant central influence over the design of the internal structures of the enterprise, as, for example, in the brigade system of work which was widespread in the Soviet Union, Bulgaria, and Czechoslovakia ( Petkov and Thirkell 1991). Although there were repeated attempts to reform the Soviet model and develop new mechanisms for the management of enterprises, these strategies came from above rather than from enterprise management. Significantly, in the 1980s it was wage reform in Hungary associated with the VGMKs and the law on cooperatives in the Soviet Union which provided new opportunities for enterprise autonomy in which management could alter internal organizational structures and labour relations. In the traditional 'Soviet' environment the most important activity of enterprise directors was bargaining over plan targets and seeking additional resources from central branch authorities ( Burawoy and Lukacs 1992; Myant 1993). Thus, as Markoczy ( 1993: 286) comments, 'these companies did not make strategic decisions in terms of economic rationality'. The constraints on enterprise autonomy in the planned economy meant that the scope for enterprise strategy in the choice of markets, in the design of enterprise structures, and in labour relations was very limited. The development of a market economy in theory enlarges the scope for enterprise strategy and frees up interests within the enterprise. In the process of transition from a centrally planned economy, 'the anticipation that interests