The Rise Of Free Agency

power is all set to shift. An extract from The 500-year old Delta shows how.

One of your employees came to you 12 hours ago with an interesting proposition. She could deliver $1 million worth of business. But there was one hitch. She wanted a 10 per cent commission before she delivered. You pointed out that this was not the way things were done. 'Tough," she said, "No commission, no deal."

Was it a good deal that this employee was structuring for herself? Not if we judge it by the traditional norms of corporate life. Great as it was, the present value of the commission she received was still worth far less than the future value of her employment guarantee, which she had fatally jeopardised by her behaviour. But this women knew what too many middle and upper level mangers have had to learn the hard way that there is no employment guarantee any longer and that, because there is none, an employment guarantee, an employment guarantee has no value beyond the moment. When she walked into her boss's office demanding a commission, this woman was declaring her free agency. She was already crossing the delta, already seeing the world for what it is, not what it was.

 

What is the rational structure of a corporate organisation? The rational structure is rules driven. It seeks to minimise the amount of time employees spend during any eight hour workday on extraneous matters. It seeks to maximise the amount of time they spend on task, whatever the task may be. The rational structure assures that an employee communicates only with his or her immediate subordinates or his or her immediate boss, and it provides penalties for going outside those channels. A rational structure rewards loyalty and demands loyalty be given in return. A rational structure has a rational pecking order. It has a rational flow of power from the mail room to the CEO's office. Time motion studies work in rational organisations because the entire organisation has been structured to assure that they work.

We could point to dozens of companies that maintain such a rational structure, dozens upon dozens of companies where the old rules still hold sway. And in doing so, we could almost assure you that unless they change their ways radically and quickly, they will cease to exist in any meaningful form within 10 years.

Why? Because reason has been deposed.

The women we mentioned above is not the first employee to figure out that loyalty is neither to be given nor received in the modern business world. Increasingly, corporations are coming to resemble National Football League teams. There are franchise employees whom you can't lure away for love or money, employees who are so central to the purpose that you will give them anything to keep them on but can, of course, fire. Just as in the NFL, there are a few employees beneath the franchise employee who are considered so valuable that you will rob the till to keep them on but can, of course, fire, too. And everyone else? They are journeymen and free agents, whom you can fire as well, but who can just as easily fire you. And the better they are at their jobs, the more survival skills they have in the corporate world, the more free-agent minded they will be. See you later, alligator.

Why do the traditional rational structures no longer work? Because connectivity has made lines of communication impossible to protect.

The locus of power floats all through an organisation in a chaos world. The woman who demanded the commission had no power in the traditional sense: her pay could have been docked. She could have been fired on the spot. But this woman wasn't dealing in that kind of power. She held the critical variable that would determine not just whether her employer got a $1 million contract but whether that contract would open other doors for the business. In a particle corporate structure, power is diffused. It's the critical variables that have muscle.

Why do rational corporations no longer work? Because of what Elliot Jacques called the "time span of discretion" has been so miniaturised by the accelerating rate of change as to become nearly immeasurable.

Jacques's theory, which he first advanced in 1956, was and is an elegant one. What he noted was that what really mattered in any organisation was not how many people you managed, not how much money you had under your control, but how binding your decision was on the life span of the organisation.

Most decisions made by most employees, whether they are clerks or on the production line, have a binding consequence on the organisation that can be measured in seconds: In the time it takes to decide to put the screw in place or enter the fulfilment code, the act itself has faded from corporate memory. Find a better, cheaper supplier for the screw guns the production line crew is assigned or for the keyboards employees are using to enter fulfilment codes, and your act begins to have a discernible time span of discretion. Come up with a strategic model for investing in $5 billion worth of bonds, and in theory you have an impact stretching into many years, and thus, by Jacques's model, you matter more to the organisation than someone making less durable decisions, even if that person has a grander title and more human and capital assets at his or her disposal.

So far, so good. But as change accelerates, the time span of discretion shrinks. In a thoroughly rational world, a decision could have a binding impact lasting many years, presumably into decades. Plans held, givens had staying power. That was the long view world that the Japanese were supposedly opening our eyes to during their miracle years of the 1980s before their cheap labour and Western core industries woke up, before the Tokyo financial crisis and the global real estate collapse.

In a chaos world the real world the time span of discretion grows shorter and shorter, and the long term always turns out different from what we expected it to be. Five year plans are death, givens are fluid. In practical terms, all decisions now however grandly meant hit the wall in months, not years. And thus it becomes nearly impossible to measure which of them has the greater impact.

Why do rationally structured corporations no longer work? Because in a world driven by variables, not by givens, workers need the flexibility to respond to variation as it arises.That is the new logic of organisation.

The bottom line? Rationally structured corporations don't recognise that the paradigm for success has shifted. It is not just that employees are disloyal to their corporations. Increasingly, to achieve the greatest possible success employees have to be first of all loyal to themselves.

The historic paradigm for personal success also depended on a rational structure, on a graduated rising through the ranks. In the professions, you would enter a major accounting firm first as an assistant or junior staffer. After three years of nearly endless nose-to-the-grindstone work, you would be promoted to the senior level, which meant you managed a group of assistants carrying out a common task. In another three years, you would become a manger in charge of seniors who were in turn in charge of assistants, and then after still another three years nine years in all you would be elevated to senior manager and eventually, so the hope went, promoted to partner.

Law firms, large architectural firms, even medicine in its own slightly skewed way followed the same procedure, and there was pure predictability to the process. So long as you performed at or near the top of your peer

group, you would move on to the next level.

Meanwhile, the partnership held all the capital and divided up all the profits, and thus had a significant vested interest in keeping the bottom of the pyramid large and the top small. Over all that was the glue of collegiality, of mutual respect, of tradition. Everyone at the top had been through what everyone beneath them was experiencing. the partners were the promise of what hard work would achieve, and it was only through the established process that you could get there.

That carefully structured process began to unravel as far back as the late 1970s. Today, although flow charts still pay homage to the principles of partnerships progression, it is largely a myth. Employees below the partnership level discovered their specialised skills had a high

economic valuation and that they could trade that valuation for more rapid advancement toward the partnership level or could

carry their skills to another firm. intellectual property, it turned out, had worth, and that worth belonged to the holder, not to the larger entity. Rainmakers, too, arose individuals who simply by virtue of their existence, their

contacts, and their reputations, could cause large pieces of business to move with them, how to maximise that value? By giving

it free expression, by moving from firm to firm, always exacting ever higher shares of the partnership profits.

Suddenly, firms that had existed essentially as guilds for hundreds of years found themselves destabilised. War broke out between younger and older members of the firm; collegiality vanished as partners battled over whether to bring rainmakers in and what percentage of the profits to pay them. And as destabilisation heightened, the value of the most critical human variables the rainmakers, the narrowly

but highly skilled seniors and managers heightened proportionally.

In the corporate world, the historic success paradigm was much the same. You entered as a junior, worked like a dog, and moved through the chairs by performing combat in the interest of the corporation. The progression wasn't as lock-step as it was in the professions; the signals of success or failure were more mixed. But if you gave, you got. In essence, the model still holds at many blue-chip companies. At IBM or DuPont, compensation rises about four percent annually on the average; if you're performing well, you can look forward to a promotion and perhaps relocation on a three-year cycle.

The problem is that this rational success paradigm no longer yields the greatest success. Just as in the professions, the greatest resources now go to the most significant human variables entrepreneurs brought in to run incubator divisions meant to spawn new products. Just as in the professions, dis-ease rakes the senior ranks when diversification imports executives who haven't been through the chairs a process that has, in fact, been going on since the 1960s. Unlike in many of the professions, the threat of downsizing of spinning off or dismantling large corporate chunks that have little potential for growth sows a sense of organisational injustice up and down the corporate ladder.

Who wins in both instances? The island hopping executive. The professional who is most willing to make life changes not in pursuit of the group mission but in pursuit of his or her own ambition. The employee who recognises that power in a chaos organisation migrates to the greatest variable, that the new success paradigm frees the individual.

The myth is that organisations can be organised in a chaos environment. The reality is that they have to disorganise the given world in order to survive in it.

No business is more scheduled than the US Postal Service, down to its every sorter and route person, and no business is more doomed to lag behind the competition as a result. How, meanwhile, did Federal Express become the most respected company in America? By doing what the US Postal Service could never in a million years bring itself to do - by rethinking express delivery from the ground floor up, by breaking every rule of common sense, by coming up with the utterly screwball proposition of flying every package it delivers into Memphis, Tennessee, of all places, so that it could take advantage of intercity exchange rates and never, ever let a delivery plane fly out of Memphis empty again. The answer, in fact, was sitting there all along, just waiting for FedEx founder Fred Smith to find it.

How the, do you organise a business in a chaos world? Precisely by disorganising it. By embracing chaos. By seeking to understand chao's true nature.n

The 500-year Delta By James Taylor and Watts Wacker Published by Harper Collins Distributed by IBD, New Delhi Price $21.75; Pages 282

In practical terms, all decisions now however grandly meant hit the wall in months, not years. And thus it becomes nearly impossible to measure which of them has the greater impact.