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The Individualized
Corporation:A
FundamentallyNew
Approachto Management
. C. Bartlett, S. Ghoshal. (Harvard Business School Press, 1997)

Managing Across Borders:
The Transnational Solution
. C. Bartlett and S. Ghoshal. (Harvard Business School Press, 2nd ed 1998)

Transnational
Management:Text,
Cases,and Readings In
Cross Border Management
. C. Bartlett and S. Ghoshal. (McGraw-Hill Higher Education, 1999)

Global Marketing
Management
. J. Quelch (Editor), C. Bartlett (Editor). (Longman, 1998)

The Differentiated
Network:Organizing
Multinational Corporations
for Value Creation
. N. Nohria. S. Ghoshal (Contributor). (Jossey-Bass, 1997)

"A New Manifesto for Management," C. Bartlett, S. Ghoshal, P. Moran. Sloan Management Review 40, no. 3, 1999

"Closing the Strategic Generation Gap: A Conversation with Christopher Bartlett," C. Bartlett. Leader to Leader 15, Winter 2000

"Beyond Strategic Planning to Organization Learning: Lifeblood of the Individualized Corporation," C. Bartlett, S. Ghoshal. Strategy and Leadership, January-February 1998

"The Myth of the Generic Manager: New Personal Competencies for New Management Roles, " C. Bartlett, S. Ghoshal. California Management Review 40, no. 1 (Fall, 1997)

Over the last year, I’ve had the opportunity to hear and talk with Professors Chris Bartlett (Harvard Business School) and Sumantra Ghoshal (London Business School) about their newest book—working title Competing on Human Capital. The research for the book is still in early stages, but well enough along to understand the thrust and direction of what should be another quiet blockbuster of business academic thought. Like a rock&roll junkie who eagerly tapes bootleg recording sessions, I’ve written this note summarizing some pretty exciting thinking I’ve had the privilege to listen in on. It’s semi-authorized, in the sense that they’ve both seen what I’ve written, but (full disclosure) it is wholly my take on their own research as they have sought to explain it. With all the usual caveats of “work in progress,” I believe it will revolutionize how we all think about human capital in today’s corporation.

Bartlett and Ghoshal’s last collaboration—The Individualized Corporation presented a then-radical framework for organization that put the individual knowledge worker at the center of enterprise design. Unlike many New Age business thinkers who studied dot.coms and post-modernist organizations, these two professors focused on large, industrial scale corporations—and they highlighted leaders who are creating work environments that shape behaviors to bring the most out of each individual’s skills and knowledge.

The new book-in-progress is a logical evolution of that work, and Bartlett and Ghoshal’s continuing research with leading-edge corporations such as General Electric, Enron, Microsoft, McKinsey & Co, and others. In lectures and discussions, they have been presenting what they believe is the emerging new paradigm of organizational strategy: the management of human, rather than financial, capital as the new scarce resource. What’s intriguing about their view, however, is not the focus on human capital per se (many others are obviously onto the same idea, and have been for some time); rather it is how they define human capital. For Bartlett and Ghoshal human capital is not only about knowledge and skills, but also about “social capital” (relationships) and “emotional capital” (motivation and emotions).

Beyond The Individual Corporation

In The Individualized Corporation, the two professors argued that large, leading corporations have begun to transition from an “engineering-mindset” of organizational design based on strategy, structure, and systems to one more organically framed around purpose, process, and people. The shift is not so much an abandonment of the classic framework (dating back to Alfred Sloan at GM), but rather a broadened way of working that recognizes the enterprise as more of a social institution—one whose center of gravity is people, their working relationships, and their sense of meaning and values in the workplace. This evolution, highlighted in the several large companies they have studied, has brought forward a new style of leadership whose success is based on managing and developing human capital as the heart of strategy.

From “What” to “How?”

The success and acclaim of The Individualized Corporation nonetheless raised in many readers’ minds the inevitable “how to” question: if the evolution described is now the new paradigm for success, what are the specific practices and approaches one must take to operationalize the vision? The Individualized Corporation did start down the path of answering the questions, describing the core processes, management roles and relationships, and a culture of stretch, and discipline, trust, and support—but the discussion was necessarily high-level, and lacked much of the granularity needed by practicing leaders.

The new book-in-progress seeks to address the operational challenges, and addresses four key questions:

    What is “human capital?’

    What are the approaches one must take to manage it superbly?

    What is the role of the organization in doing that?

    What is the role of the individual toward the same end?

To date, these two researchers have had the most to say about the first two issues. Their definition of human capital gives full importance to the knowledge, skills, and experience of workers. But, in recognizing the fundamentally social nature of the new organization, they also insist that human capital is about the “capital of relationships” and the “capital of emotions.” Further, the three components of human capital work together in a dynamic, interrelated system that must be treated holistically by managers and leaders.

The “how” of Bartlett and Ghoshal’s analysis is still very preliminary, and will not satisfy anyone looking for hard-edged tactical advice. That said—their higher-level outline is well framed. By their view, each dimension of the human capital model raises its own challenge, each of which implies a particular management approach.

The Three Challenges of Human Capital Management

    Accumulating

    Linking

    Bonding

The first challenge implied by the human capital framework is how to win the competition for talent, and also develop talent internally. Noting that every hiring decision is potentially (considering opportunity upside and not just costs) a multi-million dollar decision, the stakes of winning on this dimension are high. The authors identify three directional imperatives implied by the challenge: moving from simple “recruiting” to more “holistic talent acquisition strategy” (such as Microsoft’s ferocious cultivation of software developers); from “management training” to creating an “embedded development culture;” and from a process of “routine annual performance evaluation” to one of “continuous upgrading” of talent (a la McKinsey & Co.).

On the social dimension of human capital, Bartlett and Ghoshal described the so-called “linking challenge,” fostering relationships supportive of knowledge and learning. Here action directions include such things as creating new channels and forums of knowledge exchange, championing rewards for learning, and leading the development of a trust-based organizational culture.

The third, emotional dimension of human capital similarly implies other, complementary initiatives. Here the challenge is one of “bonding”, and shifting the focus of management away from “battling for free agents” towards building “committed communities of employees.” This will require such things as rewards for the development of the “social infrastructure” of a company, and connecting individuals’ activities and beliefs to the values and vision of the overall organization.

The New Management Mindset and “Volunteer Investors”

Rising to these challenges will require new ways of thinking and acting for leaders. If the new strategic resource is human, not financial capital, top management must portray the new focus by changing its role from shaping strategic content (“what we should do”) towards framing behavioral context (“the environment in which we act and develop”). Bartlett and Ghoshal offer an intriguing new metaphor for the employee of this new organization: no longer “assets” they should instead be seen as “volunteer investors,” choosing to invest their talent in the success of the enterprise they have joined (see Thomas O. Davenport’s article on “new metaphors” in this same issue). And correspondingly, leaders of these new organization will have to change traditional views about value creation and wealth distribution—shifting away from a sole focus on shareholders to a more equitably partitioned distribution of rewards among shareholders, employees, partners, and other contributors to the overall success of the enterprise.

Assessment of the New Model

The directional thrust of the Bartlett and Ghoshal argument seems broadly right and, given all the caveats of “work in progress,” represents a great foundation for thought leadership about a new paradigm of organization. That said, it falls short of being a complete and totally satisfying explanation of all we want to know about this next generation.

First, the model, at least as far as presented to date, underappreciates the role of the more extended enterprise in shaping the organization of the future; we have heard too little discussion about partners, channels, or other allies aligned with today’s complex organizations. Next, the research, by design, is focused on large corporations; do the same propositions necessarily hold for midsize and even small companies who also have aspirations for becoming learning organizations? If not, what would be different, and what would be the management implications, especially for these traditional “engines of innovation”? Finally, the model-in-progress still lacks real operational detail. Anyone who has ever had to lead a major change effort will hunger for a lot more specifics on creating an “embedded development culture,” and also more discussion of the role of any of the new technologies that promise to revolutionize how learning is pursued in the age of the Internet. The authors’ desire to make this research much more “how to” than their first book will also be tested by the level of detail most practicing managers will desire.

With that said, as the research continues to unfold we can certainly hope for fuller treatment and answers to thus far unanswered questions. In daring to take the debate about human capital beyond rehashed discussions of intellectual capital and skills, and raise the historically forbidden topics of social and emotional behavior, Bartlett and Ghoshal are on their way to institutionalizing a much needed perspective that truly puts “human” in human capital. We look forward to more.

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, and maintains ongoing relationships with several major corporations as both a board member and as a consultant/management advisor.

Sumantra Ghoshal holds the Robert P. Bauman Chair in Strategic Leadership at the London Business School. He has also taught at the MIT/Sloan School of Management and INSEAD. The author of numerous books, articles, and case studies, he was named by The Economist as one of the "EuroGurus" in management.

Brook Manville is the publisher of LiNE Zine, and is always on the lookout for interesting, groundbreaking ideas.

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