Toward The New Organisation

Supported by Peter Drucker and Charles Handy, The Organisation of the Future offers todays and tomorrows leaders wisdom in reshaping their own organisations for the future.

For over a century, starting in the 1860s, the trend world-wide was toward an employee society of big organisations. This trend seemed inexorable and irreversible. The world best-seller in 1965 was a book by a French politician and journalist, Jean-Jacques Servan-Schreiber, titled Le Defi americain (The American Challenge). Servan-Schreiber predicted that, by 1990 or so, four-fifths of the world's manufacturing would be in the hands of, at most, fifteen American multinational companies, each employing hundreds of thousands of people world-wide. But just when this book had sold millions of copies, the tide turned. Production and sales in the world economy have more than tripled in these thirty years, but since the mid-sixties, most of the then-existing big businesses American, British, German, French, Swiss, and even Japanese have lost market share world-wide. Adjusted for inflation, few have grown at all, except by merger or acquisition. One example: in the last ten years, since the mid eighties, US

exports of manufactured goods have almost doubled. About 80 to 90 per cent of that growth has come from small or medium-sized companies. In fact, where we used to speak of economies of scale, we now increasingly speak of diseconomies of scale.

The trend toward an employee society of big organisations gathered rapid momentum after World War I and, especially, after World War II. In 1914, before the outbreak of World War I, the great majority of people in the workforce in every developed country were not independent or self-employed. They were employees as the great majority of workers have been since prehistoric times. But they did not work for an organisation. They worked for a master or a mistress as hired hands and sharecroppers, as domestic servants, as salespeople in small stores, or as apprentices and journeymen in crafters shops. Only blue-collar workers in manufacturing plants worked for an organisation, and they were still a small minority no more than a tenth of the workforce, even in highly industrialised countries.

By 1965, at least four-fifths of the workforce in the developed world the United States, Germany, the United Kingdom, and Japan had become employee of organisations. In fact, President Lyndon Johnson's Great Society programmes, such as Medicare, assumed that by 1990 or 1995 practically everyone in the US workforce would have become an employee in a big organisation (and thus have both employer-paid health insurance and an employer-paid pension). But just as everyone had accepted this forecast, the tide turned. The great majority of today's workforces in highly developed countries do indeed work for or at least with an organisation. But increasingly, they work not as employees of an organisation but as temporaries, for an outsourcing contractor, as specialists providing expert services, and so on. We are moving toward a network society rather than an employee society.

For over a century, from their beginnings in the 1860s and 1870s, organisations were based on ownership. The typical company owned, or at least controlled, whatever it considered its business. Independent suppliers and distributors existed, but they were outside. The company itself was based on command and control, anchored in ownership. That is still the structure of traditional businesses, but increasingly, command and control is being replaced by or intermixed with all kinds of relationships: alliances, joint ventures, minority participations, partnerships, know-how, and marketing agreements all relationships in which no one controls and no one commands. These relationships have to be based on a common understanding of objectives, policies, and strategies, on teamwork, And on persuasion or they do no work at all. And where the old command and control organisation based on ownership was meant to be permanent, many of the new relationships are temporary and ad hoc.

The multinational business is not, as most people assume, an invention of the post-World War II period. It goes back to the fifteenth century, to the worlds first financial superpower, the Florence-based Medici bank. It was the worlds first true multinational, with sixteen or eighteen branches covering all of Europe. In both manufacturing and finance and even in retailing, multinationals held a substantially larger share of the world's business in the decades before the First World War than they do even today. But multinational meant then, as it did for the Medici, having separate businesses in separate countries under common ownership. The Swiss subsidiary of the US based National Cash Register Company made and sold the same US designed products as every other National Cash Register subsidiary, but it was run as a Swiss company, was staffed by Swiss national (except may be for an American comptroller), made all its products in Switzerland, and sold them exclusively in Switzerland. To this day, most British know that the Ford Motor Company and the Woolworth Corporation are true-blue English companies and that Ivory soap is made by an English company. But Ford and Woolworth are, of course, wholly owned subsidiaries of US companies, and Ivory soap is made by the wholly owned subsidiary of Americas Procter & Gamble. But until fairly recently, these subsidiaries were run as autonomous or at least separate English companies.

Increasingly, companies, even quite small ones, have to be run as transnational businesses. Their market may still be local or regional, but their competition is global. Their strategy also has to be global, in respect to technology and finance, products and markets, information and people. This is also true for organisations other than businesses. The small management school where I teach, for instance, has to base its curriculum on the assumption that it competes not only with management schools in Southern California and the United States but also in fact, primarily with management schools in half a dozen European countries and even with management schools in New Zealand. Increasingly our prosperity, indeed our survival, depends on enrolment from foreign countries, and especially from Asia and Europe, in our Executive Management Programme. And management schools in Switzerland and France are rapidly becoming our most serious competitors in attracting students.

A good many writers, seeing all these changes and all this turmoil, are writing of the end of organisations. That, however, is the one thing we can predict with certainty will not happen. To be sure, theoretically, anarchy the absence of organisation is by far the most consistent and most persuasive theory. The only flaw is that it does not work. Organisations will be needed even more than before. Precisely because there will be so much ambiguity, so much flexibility, so many variations, far more clarity will be needed in respect to mission, values, and strategy, in balancing long-range and short range goals, in defining results. Above all, absolute clarity will be needed as to who makes ultimate decisions and who is in command in a crisis.

What we mean by organisations is indeed changing. The first definition of an organisation it might be called the first theory of the organisation comes from the way the Prussian king Frederick the Great, in the mid-eighteenth century, defined his invention of the modern army. An army, he said, has three parts, infantry walks, cavalry rides, artillery is being pulled. An organisation, in other words, is defined by how different work is being done. This basic concept underlay all military organisations through World War II. But it was also the concept that underlay the first attempt to define business organisations: the theory of the manufacturing business, which was developed around the time of World War I by a French executive, Henri Fayol, the head of what was then Europe's largest coal mining company. The purpose of the organisation is to get the work done. This requires a structure that puts similar work, like engineering manufacturing, and selling, into departments. After World War I and Alfred

Sloans reorganisation of General Motors Corporation (and culminating in the 1950s with the decentralisation of the American General Electric Company), we superimposed on Fayols model a structure called the business unit. It tries to balance the internal concern for getting the work done with the external concern of serving the market. It is still the most widely accepted approach and underlies all of the present discussion of balancing core competencies and market focus as well as the present concern with reengineering.

But now a totally different approach is emerging, not replacing the older approaches but being superimposed on them: it says that the purpose of organisations is to get results outside, that is, to achieve performance in the market. The organisation, is however, more than a machine, as it is in Fayols structure. it is more than economic, defined by results in the marketplace. The organisation is, above all, social. It is people. Its purpose must therefore be to make the strengths of people effective and their weaknesses irrelevant. In fact, that is the one thing only the organisation can do the one reason why we have it and need to have it.

But as important as these shifts may be in the theory of the organisation and the resulting shifts in its structure, even more important is the fact that we are rapidly moving away from the belief that there has to be one theory of the organisation and one ideal structure, the belief that underlay Fredrick the Greats definition of an army, Fayols typical manufacturing company, and the business units of Sloans General Motors and Jack Welchs General Electric. A good many of the contributors to this volume still seem to believe that there is or should be one ideal organisation. But the very diversity of their contributions makes it clear that organisations will increasingly be fashioned differently: for different purposes, different kinds of work, different people, and different cultures. The organisation is not just a tool. It bespeaks values. It bespeaks the personality of a business, a non-profit enterprise, a government agency. It is both defined by and defines a specific enterprises results. The

most novel fact, and this volume clearly expresses it, is that we are rapidly moving toward a plurality and a pluralism of organisations. We are rapidly moving toward the new

organisations.

The Organisation of the Future Edited by Frances Hesselbein, Marshall Goldsmith and Richard Beckhard Published by Jossey-Bass Publishers Distributed by IBD, New Delhi Price $ 18.75;