Vocabulary
to dehumanize workers
piece rate
time rate
to refine one’s principles
(in)efficiency
leadership n
Vision n
management fad
management practices
leverage n
leveraged a
leveraged buyout
junk bond
bloated a, syn.swollen, sprawling
champion v
champion n
national champion
medical coverage
preference tree
tug of war
an overbearing boss
UNIT 2. THE NEW ORGANISATION
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Competencies
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READING AND SPEAKING (1) |
What forms of organisations can you name?
What structure was considered pre-eminent in the industrial past?
What do you know about the new workers of the Information Age: the knowledge workers and networked workers?
Are the organisational structures servants to the corporate strategy or the other way round?
Are our corporate structures effective for tomorrow or only suitable for yesterday?
1. Scan the following text and say why new organisational structures are needed in today’s environment.
The New Organisation
The way people work has changed dramatically, but the way their companies are organized lags behind, says Tim Hindle
FIFTY years ago William Whyte, an editor at Fortune magazine, wrote a book called "The Organisation Man" that defined the nature of corporate life for a generation. The book described how America (whose people, he said, had "led in the public worship of individualism") had recently turned into a nation of employees who "take the vows of organisation life" and who had become "the dominant members of our society".
Foremost among the organisations that Whyte had in mind was the corporation, which he thought rewarded long service, obedience and loyalty quite as faithfully as did any monastery or battalion. "Blood brother to the business trainee off to join DuPont is the seminary student who will end up in the church hierarchy," he wrote. The New York Times praised Whyte for recognising that "the entrepreneurial scramble to success has been largely replaced by the organisational crawl."
In an article in the McKinsey Quarterly last year, Lowell Bryan and Claudia Joyce, two of the firm's consultants, argued that "today's big companies do very little to enhance the productivity of their professionals. In fact, their vertically oriented organisational structures, retrofitted with ad hoc and matrix overlays, nearly always make professional work more complex and inefficient." In other words, 21st-century organisations are not fit for 21st-century workers.
Mercer Delta, a consulting firm that specialises in "organisational architecture", recently observed that "the models and frameworks that shaped our leading organisations from the end of the second world war through the conclusion of the cold war are dearly obsolete in this new era of e-business, perpetual innovation and global competition." The design of today's complex enterprises, says Mercer Delta, requires an entirely new way of thinking about organisations.
The classic structure in which organisation man felt comfortable consisted of number of business units that operated similarly but separately. They were controlled by a head office that determined strategy and watched over its implementation. It was a system of command and control in which everybody knew his place made visible in the organisation charts that laid down the corporate hierarchy.
A surprising number of companies today still have much the same command-and-control structure that they had 50 years ago. According to the Boston Consulting Group, what it calls "the imperialist corporate centre" is still the most common type of headquarters. And companies that do decentralise decision-making and accountability often recentralise it again when they run into trouble.
Twenty years ago, Motorola, a co-inventor of the mobile phone, was a tightly centralised business. Three men in its headquarters at Schaumburg, Illinois, were in control of almost everything that went on. As the company grew, they decided to decentralise. But by the mid-1990s the company's mobile-phone business was growing so fast that decentralisation made it impossible to control. "While the numbers are getting better, an organisation can be falling apart," says Pat Canavan, Motorola's chief governance officer. In 1998 the company laid off 25,000 people and repatriated control to the Schaumburg headquarters.
The trouble with silos
The main failing of the classic structure was that it impeded the spread of knowledge and limited the economies of scale that could be reaped. Ideas and commands moved up and down from headquarters to the units, leading to the creation of vertical "silos" with very little communication between them. Financial-service institutions were notorious for not knowing whether customers who signed up for one service were already customers for other services being provided by the same institution.
As firms became more global, they added what McKinsey called a "matrix overlay" to this structure. Most famously associated with Philips, a Dutch electrical and electronics giant, this attempted to take more account of the different national markets in which a company was operating by superimposing geographical silos that cut across the traditional business units.
Such organisations have not commanded universal admiration. In 1990, in a paper published by the Harvard Business Review, Sumantra Ghoshal and Christopher Bartlett, two academics, reported that matrix structures "led to conflict and confusion; the proliferation of channels created informational logjams as a proliferation of committees and reports bogged down the organisation; and overlapping responsibilities produced turf battles and a loss of accountability." Nigel Nicholson, a professor of organisational behaviour at the London Business School, called the matrix structure "one of the most difficult and least successful organisational forms."
Messrs Ghoshal and Bartlett wrote in the past tense, suggesting that companies had escaped from the matrix corset. But 15 years after the article was published, many are still trying to struggle free.
Gerard Fairtlough, a former CEO of Shell Chemicals and the founder of Celltech, a British biotechnology company, also suggests that companies are still being held back by their addiction to hierarchy. In a recent book, "The Three Ways of Getting Things Done", he points to alternatives to the hierarchical structure that many companies see as their only option. "You can't have a bunch of hippies running a plant full of explosive hydrocarbons," he says. "But would you rather have the plant operated by trained professionals, for whom pride in safe working is part of their personal identity, or by people who only work safely because they are afraid of the boss? The identification of discipline with hierarchy is a dangerous mistake." Mr Fairtlough's preferred alternative is something he calls "responsible autonomy", a form of organisation in which groups of workers decide for themselves what to do, but are accountable for the outcome.
Clearly there is a need for new kinds of organisation that are more appropriate to modern working methods. But there are many reasons why companies are not in a hurry to adopt them.
The Economist, 21stJanuary, 2006
2. Read the text and find information to answer the following.
a) What observations do the analysts make about the hierarchical and matrix organizations?
William White;
Mercer Delta;
Messrs. Ghoshal and Bartlett;
Nigel Nickolson;
Mr Fairtlough;
the author.
b) What kind of organisation will suit the knowledge worker and the networked worker best?
3. Explain the following quotes from the text.
"Blood brother to the business trainee off to join DuPont is the seminary student who will end up in the church hierarchy.”
“The entrepreneurial scramble to success has been largely replaced by the organisational crawl.”
4. Infer the meaning of the following words and phrases from the context.
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retrofit
command admiration
informational logjams
matrix corset
R
EADING
AND SPEAKING (2)
5. Read the following text and say what factors contributed to the survival of the biggest companies. Make a mind-map of the text.
Big is back
Corporate giants were on the defensive for decades. Now they have the advantage again
IN 1996, in one of his most celebrated phrases, Bill Clinton declared that “the era of big government is over”. He might have added that the era of big companies was over, too. The organisation that defined capitalism for much of the 20th century was then in retreat, attacked by corporate raiders, harassed by shareholders and outfoxed by entrepreneurs.
Great names such as Pan Am had disappeared. Others had survived only by dint of huge bloodletting: IBM sacked 122,000 people, a quarter of its workforce, between 1990 and 1995. Everyone agreed that the future lay with entrepreneurial start-ups such as Yahoo!—which in late 1998 had the same market capitalisation with 637 employees as Boeing with 230,000. The share of GDP produced by big industrial companies fell by half between 1974 and 1998, from 36% to 17%.
Today the balance of advantage may be shifting again. To a degree, the financial crisis is responsible. It has devastated the venture-capital market, the lifeblood of many young firms. Governments have been rescuing companies they consider too big to fail, such as Citigroup and General Motors. Recession is squeezing out smaller and less well-connected firms. But there are other reasons too, which are giving big companies a self-confidence they have not displayed for decades.
Big can be beautiful…
Of course, big companies never went away. There were still plenty of first-rate ones: Unilever and Toyota continued to innovate through thick and thin. And not all start-ups were models of success: Netscape and Enron promised to revolutionise their industries only to crash and burn. Nevertheless, the balance had shifted in favour of small organisations.
The entrepreneurial boom was supercharged by two developments. Deregulation opened protected markets. Some national champions, such as AT&T, were broken up. Others saw their markets eaten up by swift-footed newcomers. The arrival of the personal computer in the 1970s and the internet in the 1990s created an army of successful start-ups. Steve Jobs and Steve Wozniak founded Apple Computer in 1976 in the Jobs family’s garage. Microsoft and Dell Computer were both founded by teenagers (in 1975 and 1984 respectively). Larry Page and Sergey Brin started Google in Stanford dorm rooms.
But deregulation had already begun to go out of fashion before the financial crisis. The Sarbanes-Oxley act, introduced after Enron collapsed in disgrace, increased the regulatory burden on companies of all sizes, but what could be borne by the big could cripple the small. Many of today’s most dynamic industries are much more friendly to big companies than the IT industry. Research in biotechnology is costly and often does not bear fruit for years. Natural-resource companies, whose importance grows as competition for resources intensifies, need to be big — hence the mining industry’s consolidation.
Two further developments are shifting the balance of advantage in favour of size. One is a heightened awareness of the risks of subcontracting. Toy companies and pet-food firms alike have found that their brands can be tainted if their suppliers (notably, from China) turn out shoddy goods. Big industrial companies have learned that their production cycles can be disrupted if contractors are not up to the mark. Boeing, once a champion of outsourcing, has been forced to take over faltering suppliers.
A second is the emergence of companies that have discovered how to be entrepreneurial as well as big. These giants are getting better at minimising the costs of size (such as longer, more complex chains of managerial command) while exploiting its advantages (such as presence in several markets and access to a large talent pool). Cisco Systems is pioneering the use of its own video technology to improve communications between its employees. IBM has carried out several company-wide brainstorming exercises, recently involving more than 150,000 people, that have encouraged it to put more emphasis, for example, on green computing. Disney has successfully ingested Pixar’s creative magic.
You might suppose that the return of the mighty, now better equipped to crush the competition, is something to worry about. Not necessarily. Big is not always ugly just as small is not always beautiful. Most entrepreneurs dream of turning their start-ups into giants (or at least of selling them to giants for a fortune). There is a symbiosis between large and small. “Cloud computing” would not provide young firms with access to huge amounts of computer power if big companies had not created giant servers. Biotech start-ups would go bust were they not given work by giants with deep pockets.
The most successful economic ecosystems contain a variety of big and small companies: Silicon Valley boasts long-established names as well as an ever-changing array of start-ups. America’s economy has been more dynamic than Europe’s in recent decades not just because it is better at giving birth to companies but also because it is better at letting them grow. Only 5% of European Union companies born since 1980 have made it into the list of the 1,000 biggest in the EU by market capitalisation. In America, the figure is 22%.
…but size isn’t really what matters
The return of the giants could well be a boon for the world economy—but only if business people and policymakers avoid certain pitfalls. Businesses should not make a fetish of size, particularly if this means diversifying into a lot of unrelated areas. The conglomerate model may be tempting when cash is hard to find. But the moment will not last. By and large, the most successful big firms focus on their core businesses.
Policymakers should both resist an instinctive suspicion of big companies and avoid the old error of embracing national champions. It is bad enough that governments have diverted resources into propping up failing companies such as General Motors. It would be even more regrettable if they were to return to picking winners. The best use of their energies is to remove the burdens and barriers which prevent entrepreneurs from starting businesses and turning small companies into big ones.
The Economis,t Aug 27th 2009
6. Explain the following.
entrepreneurial start-ups
well-connected firms
through thick and thin
swift-footed newcomers
to be supercharged
tainted products, brands
shoddy goods
to go bust
to be a boon for
by and large
core businesses
to prop up
deep pockets
to minimize the costs of size
7. Define the following concepts. Use the Internet resources if necessary.
cloud computing
green computing
a conglomerate model
national champions
8. Comment on the following quotes from the text.
The organisation that defined capitalism for much of the 20th century was then in retreat, attacked by corporate raiders, harassed by shareholders and outfoxed by entrepreneurs.
And not all start-ups were models of success: Netscape and Enron promised to revolutionise their industries only to crash and burn.
Natural-resource companies, whose importance grows as competition for resources intensifies, need to be big.
Boeing, once a champion of outsourcing, has been forced to take over faltering suppliers.
Disney has successfully ingested Pixar’s creative magic.
Biotech start-ups would go bust were they not given work by giants with deep pockets.
The best use of their energies is to remove the burdens and barriers which prevent entrepreneurs from starting businesses and turning small companies into big ones
9. Read the following information and make a mind-map of the article “Big is back”. (Portfolio entry).
Mind Mapping
Mind mapping is a tool peculiarly suited to the ways we process information.
It is a useful technique that improves the way you take notes, and supports and enhances your creative problem solving.
By using Mind Maps, you can quickly identify and understand the structure of a subject, and the way that pieces of information fit together, as well as recording the raw facts contained in normal notes.
More than this, Mind Maps encourage creative problem solving, and they hold information in a format that your mind finds easy to remember and quick to review.
Popularized by Tony Buzan, Mind Maps abandon the list format of conventional note taking. They do this in favor of a two-dimensional structure. As such, a good Mind Map shows the 'shape' of the subject, the relative importance of individual points, and the way in which facts relate to one another. Mind Maps are more compact than conventional notes, often taking up one side of paper. This helps you to make associations easily. And if you find out more information after you have drawn the main Mind Map, then you can easily add it in.
Mind Maps are also useful for:
Summarizing information;
Consolidating information from different research sources;
Thinking through complex problems; and
Presenting information in a format that shows the overall structure of your subject.
What's more, they are very quick to review as you can often refresh information in your mind just by glancing at one. In the same way, they can be effective mnemonics: Remembering the shape and structure of a Mind Map can give you the cues you need to remember the information within it. As such, they engage much more of your brain in the process of assimilating and connecting facts, compared with conventional notes.
Business Applications of Mind Mapping
While the concept of mind mapping can be applied to any situation that requires problem solving and organisational skills, there are several areas in which the technique can be an invaluable tool in business.
Mission Statement/Values
From day one a mind map can help lay out the initial strategy of an enterprise. While a successful enterprise must be based on a good idea, it will only achieve success if the management have a clear strategy for capitalising on that idea. A mind map can be an excellent tool for developing the business plan of the enterprise, and understanding the values upon which it will be based. Starting with a central vision (i.e., a ‘best case’ image of the enterprise three or more years down the line), a mind map can be used to outline the methods by which that vision can be realised (i.e., strategies, programs and objectives).
New Product Development
Mind maps can also be invaluable in making sense of the hundreds of functions and processes necessary to successfully develop a new product and bring it to market. Every product begins with a central idea. Even before the physical product is envisioned there is a basic concept — the product should do this, or make that easier. Using that idea as the centre of a mind map, an enterprise can unlock the creativity of its designers and allow them to work through the problem of achieving the central goal.
Manufacturing/Supply Chain Management
One of the largest problems facing an enterprise involved in the manufacture of goods is in optimising the supply chain and manufacturing processes. While traditional linear thinking on process optimisation may stifle creativity, the use of mind maps can offer decision makers the opportunity to develop creative new methods — be it through finding new sources for materials, streamlining the manufacturing process itself or brainstorming better distribution methods.
Marketing
Finally, mind maps can be of great use in the development of marketing strategies. The development of an effective marketing strategy depends greatly on the leverage of the assets of the enterprise as well as market-led considerations. The use of a mind map to outline the way in which the assets of a company are used to aid the marketing process can go a long way to creating a successful marketing plan.
Drawing Simple Mind Maps
To make notes on a subject using a Mind Map, draw it in the following way:
Write the title of the subject you are exploring in the center of the page, and draw a circle around it.
As you come across major subdivisions or subheadings of the topic (or important facts that relate to the subject) draw lines out from this circle. Label these lines with these subdivisions or subheadings.
As you "burrow" into the subject and uncover another level of information (further subheadings, or individual facts) belonging to the subheadings above, draw these as lines linked to the subheading lines
Finally, for individual facts or ideas, draw lines out from the appropriate heading line and label them.
As you come across new information, link it in to the Mind Map appropriately.
A complete Mind Map may have main topic lines radiating in all directions from the center. Sub-topics and facts will branch off these, like branches and twigs from the trunk of a tree. You do not need to worry about the structure produced, as this will evolve as you develop your mind map.