Your organization is a century behind

by rohit on October 2, 2009

(Marketers Kaleidoscope, a  blog on marketing & Internet, happens to have taken a detour into the ‘land of work’. Continued here from the last two posts, are musings on ‘organizations’. Third in a series.)

  • Is your organization unable grow / compete in the current environment?
  • Are you not committed or passionate about working at your current organization?
  • Do you work for a very large organization?

If you said ‘Yes’ to any of the above, then this post – which attempts to trace how we have got to the above point – will be of interest*.

The story of the last two posts

  1. In the last two posts the Towers Perrin study showed that only 21% of employees worldwide feel “engaged.”
  2. Organizations, which are only a hundred years old institution, are not yet perfect. (Democracy has been around for 2,500 years and, many argue, we are not there yet).
  3. All through history, firms were usually small proprietorships with less than ten people. There is also scientific evidence that humans find it difficult to socially relate to more than 150 people. Yet today, it is routine for organizations to have thousands of people.
    As late as 1890, the average firm in the U.S. had just 4 employees, and the (few) largest ones had a couple of hundred. In fact, nine of ten white males worked for themselves. And the ‘educated’ all worked for themselves, working for someone else was considered repugnant.

    Here is the rest of the story :

  4. In the beginning of the 20th century, however, a revolution occurred. “Scientific management”, first developed by Frederick Taylor, appeared. Here, systematic principles were formulated to get better productivity.
    It was earlier believed that first-class business performance needed first-class i.e. extraordinary men and work could be done by rules of thumb or tradition. This now changed to the belief that systematic management was paramount.

    “In the past the man has been first; in the future the system must be first”. Here is a short bio of Taylor along with a couple of chapters of his 1911 monograph.

  5. A key assumption of scientific management was that work practices could be closely controlled by managers. To enable this however, a bureaucratic organization was required – with hierarchical reporting, tight job descriptions, division of labour, etc. Boss, subordinate, chain of command, organizational level, top-down, bottom-up and other such entities came into existence .
    These new management principles were successful – and how! The Ford Motor Co., founded in 1903, became in just ten years large enough to make half a million cars a year. Scientific management enabled large organizations to take root.
  6. While organizations – and productivity – grew, there were some adverse  consequences for people themselves.

    , people’s habits and lives changed. People were now “employed” so they effectively sold their time, not products. They also worked fixed hours, ate meals at fixed times and repeated the same small tasks day in and day out. This had never been the case before. Lifestyles changed to an ‘unnatural’ mode.

    , how people related to their work changed too…
    While in preindustrial times, farmers and artisans had an intimate relationship with their customers, in the large new organizations, employees had to rely on someone to tell them how effective their work was and whether their customers were happy.
    And, there were a number of departments; each employee became disconnected from final product. These people were no longer proud craftsmen but cogs in a machine.
    The increase in the number of departments also ‘separated’ employees from their co-workers and made them unable get a system-wide view of the organization.
    This complexity also reduced the information available to employees; they did not get to know how the company was doing overall.
    It also created a gulf between workers and owners since most 20th century employees now reported to low level supervisors. Earlier they worked for the owners of the small firms.
    Work methods and procedures were now defined by staff experts, thus not easily altered; the employee’s creativity thus did not count here.
    And,only since individual employees did not have information and the entire context, were managers needed. Thus, despite having experience and wisdom, the employees had to accept control from above. This led to disaffection.
    To put it simply, scale and efficiency happened but employees became  “disaffected” or “disengaged”. The bureaucracy could aggregate effort but not mobilize extra effort, by getting people to go above and beyond.
  7. Once the above principles took root, they became management gospel for generations of managers. Further, MBA colleges (and India alone has 180 numbers, churning out 125,000 MBAs annually) preach the above practices. Thus there is an entire community of managers which has been taught and practice just one – 20th century way – to manage.
  8. There was at least one exception. Toyota. While it had assembly line manufacturing essentially similar to its American competitors, Toyota alone sought to involve its employees. At Toyota, even first-line employees are given tools and training such that they can become problem solvers and innovators and added much value. Toyota’s success was thus based on a wholly different paradigm or set of principles from the U.S. companies. It emphasized the capabilities of it’s employees and responsibilities of it’s leaders, while the U.S. companies relied on staff experts.

    Fast forward to the 21st century

9. Business conditions have undergone a sea change. A scorching pace of change that includes deregulation, new technology, digitization, Internet and low telecom costs, free availability of capital, new types of competitors, scarcity of talent, offshoring, globalization, etc. is at hand. Companies are finding it difficult.

Organizations are however still run in the old, hierarchical or quasi-feudal way, with the CEO as monarch and operational efficiency as the key requirement. They are literally a century behind.

Not many of us even know of other ways to organize (we never learnt it at B-School, remember). Nor do most of us intuitively believe that a new way of managing – for the 21st century -is now absolutely necessary. Yet this is what the gurus (Gary Hamel*) and consultants (McKinsey**) have been telling us for at least last couple of years.

So what’s the key to a successful 21st century organization? One approach : Harness mind power.

And yes, a few differently managed organizations do exist already.

More on this in the next post.

– @#%^#@ –

* This post borrows heavily from The Future of Management by Gary Hamel (2007) which has a US-centric context, however the conclusions drawn above are likely applicable elsewhere too.

** Mobilizing Minds : Creating Wealth from Talent in the 21st Century Organization – Lowell L. Bryan & Claudia I. Joyce, McKinsey & Co. (2007).

Previous posts in this series on organizations :

Do you enjoy working at your current organization ?

Why your organization finds it difficult to be a better place to work

See also : Remembering Drucker

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