There
comes a day in the life of every car when tune-ups are no longer sufficient
to cover problems. When patches can’t fix systemic flaws and keep the
car running smoothly. Christopher Bartlett, Harvard Business School professor,
author, consultant, and organizational mechanic-extraordinaire says that
day is here for many companies. He is calling for nothing less than a
complete engine overhaul for today’s larger, established organizations.
LiNE Zine caught
up with Bartlett and asked him about his vision of the future, and how
the old boxy-sedan organizations of today need to transform into responsive,
intelligent, and efficient roadsters—or
risk ignominious death on the scrap heap. Bartlett tells us that organizations
have to recognize their parts—their
people—are critical to the success of the whole. They have to create
an environment that makes the most of each individual’s knowledge and
skills. And they should start by replacing old doctrines with a new management
philosophy that emphasizes purpose and process, not strategy and structure.
Only then can they move beyond direction and control toward freedom and
better organizational performance. After all, whether in the Old Economy
or the New, a smooth, high-performance ride is what we’re all after.
A
Major Transformation
Is Underway
Right now we are experiencing
the biggest change in the corporate model in 75 years. In a world filled
with big changes, this is a huge one. It portends not just a radical restructuring
of the structural form, but also a major transformation in the nature
of managerial work. A whole set of forces—today’s
usual suspects, including globalization, the information age, the service
economy, deregulation, and the knowledge revolution—are
converging.
Start-ups get off pretty
easily in this revolution. They can build and invent themselves around
the new forces. The real challenge is for large corporations, with their
embedded technology, people, and organizational models. How do they transform
themselves? Unless companies see this as a systemic issue, they’ll continue
to try fine-tuning at the margins—tinkering
with the engine—rather
than understanding that a whole systemic modeling change is happening.
In effect, the engine has to be replaced.
The Old System No Longer
Works
To understand where the
world is moving, it helps to understand where we are coming from. Look
around you. The organization that many of you are in right now is the
corporate model that’s driven us for 75 years. And it’s what we now have
to pull apart.
We’re coming from a corporate
model based on 3 S’s: Strategy, Structure, and Systems. Strategy
was set by allocating the scarce resource (capital). Structure was designed
to hold units accountable (divisionalized). Systems provided the means
for the elaborate planning and control process to work.
The integrated model created
clear management roles and responsibilities based on delegation and control.
Top management were strategic resource allocators who managed scarce capital
resources, allocated them across competing needs, then measured, evaluated,
and controlled them. Middle management managed the process that supported
top management’s activities. They sent the capital budgets up; they controlled
against the objectives top management sent down. Front line managers were
the operating implementers who lived within the budgets and controls of
the top managers.
So What Happened That
Made Change Imperative?
For one, all those New
Economy forces began converging. But at the heart of the corporate model
transformation is a fundamental change in the scarce strategic
resource companies need.
Today’s Scarce Strategic
Resources are Information, Knowledge, and Expertise
Today’s critical scarce
resource is no longer capital. Quite the opposite, since most companies
today are awash in capital. It is now information, knowledge, and expertise.
In essence, it’s people and the processes that link them to leverage their
know-how.
This simple fact is undermining
everything we know about the organizational model and changing the game
completely. As a result, the control-based Strategy, Structure, and Systems
processes that drove the old model are inadequate today. Consider this:
- Before, capital could
be accumulated at the corporate level and allocated. Now, knowledge
and expertise are diffused throughout the organization and controlled
by front line employees, leaving organizations very vulnerable. The
critical strategic resource walks out the door each night. And people
are a lot more difficult to control and predict than capital!
- Before, capital could
be allocated down on the basis of budgets and systems. Now learning
is developed through front line experimentation and cross-organizational
interaction. Indeed, that’s become the critical process, not measuring
and controlling capital.
- It used to be that you
could evaluate performance on the basis of financially driven performance
and control systems. Now, we don’t have the ability to measure the creation,
implementation, diffusion, and operationalization of knowledge.
Shift >From a Corporate
Mentality Driven by Strategic Planning
With all of these organizations
competing for information, knowledge, and expertise—essentially,
people—today’s
corporate competitive advantage resides in the people in the company and
the organizational capability that’s built around them. Organizations
need to change the way they operate.
How are companies responding?
Most are simply tweaking
the tired framework. Tinkering with the engine. Consultants and academics
are enjoying a field day amid loud cries of "What do we do?"
emanating from organizations. Witness the abundance of tools and techniques
that companies desperately grasp such as reengineering, core process redesign,
retention management. The list of tools and techniques, as most of us
can attest, is extensive. Many companies are building up their infrastructure
in sophisticated information systems, knowledge transfer processes and
networks, and communities of practice.
Yet all these investments
are wasted. They are focusing on systems and technology, while companies
don’t attract, retain, and motivate people. So most organizations
are leaking the talent the systems are built for!
Move Beyond the Old Model
At the heart of the transformation
has to be a move beyond the Strategy, Structure, Systems philosophy to
a broader philosophy that’s based on Purpose, Process, and People.
Notice we are not moving "from-to", but rather "beyond."
This is about hard-nosed organizational designs that still have Strategy,
Structure, and Systems in place, but recognize that these elements alone
are no longer sufficient.
Some organizational mind-shifts
are crucial.
1.
From Strategy to Purpose - In order to create organizational learning,
companies have to create a sense of shared purpose and belonging for all
individuals.
Companies are no longer
simply economic enterprises. Managers must create and manage companies
as social institutions as well. It’s no small order, but top management
must convert the contractual employee of an economic entity
into a committed member of a purposeful organization:
- Attracting a scarce
resource-smart, capable people-depends increasingly on
creating not just a place where they come to work, but a place where
they can belong, especially in a world where so many social institutions
(communities, neighborhoods, families) are dysfunctional or completely
broken down.
- The heart of creating
an environment where learning can take place is creating an internal
environment where people can and do relate to each other—formally
and informally. Social networks are the key link in developing and diffusing
expertise through the organization.
2.
From Structure to Process.
The organization is not
just a hierarchy of tasks and responsibilities, but also a portfolio of
flexible roles and relationships. The main task of the organization is
to shape behaviors of people and create an environment that enables them
to take initiative, cooperate, and learn. Formal organization charts are
no longer the issue. Now, linking assets and resources through redefined
relationships is key.
3.
From Systems to People - Restructure systems to reflect the new
source of competitive advantage.
The old system was structured
to measure, evaluate, and reward people around financial measures. Not
surprisingly, people were viewed and treated as costs.
Now, with people the source
of competitive advantage, Human Resources is the critical function in
today’s organization. HR practices and policies should no longer be abrogated
to some functional unit miles away from the CEO. The chief HR officer,
along with the learning and knowledge management officers, should be literally
and figuratively close to the CEO, with equal (if not greater) standing
than the financial officers.
Until organizations can
learn to attract, motivate, develop, and retain superior people—and
build a community where these people can leverage their knowledge and
expertise—everything
else they do is supplemental. Transforming organizations relies upon transforming
human behavior. Creating an organization based on self-discipline, trust,
and support is about creating this behavioral context.
People are the foundation
on which all of this is built. The most sophisticated systems and technical
structures will be completely wasted if there’s leakage of talent, a demotivated
workforce, or a culture that doesn’t support sharing of knowledge.
Christopher Bartlett is the Daewoo Chair of Business Administration
at Harvard Business School where he also serves as Chairman of the School’s
General Management Area. He is the author or coauthor of five books, including
(coauthored with Sumantra Ghoshal) The Individualized
Corporation: A Fundamentally New Approach to Management, Harperbusiness,
1997, and
Managing Across Borders: The Transnational Solution, Harperbusiness,
1989. In addition to his academic responsibilities, he maintains ongoing
relationships with several major corporations, serving both as a board
member and as a consultant/management advisor.
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