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The development and maintenance of information system will be taken over largely by the users themselves because information technology will become easier to configure and use.
many required technical skills will be "out sourced." along with other staff functions, to small companies or consultants who will serve organizations on a contract basis.
organizations will save money by avoiding the need for permanent staffs will expensive benefits.
This will mean that the boundaries of organizations will often be hard to discern with an increase of joint venturing and out sourcing, the work of organizations will be shared by a number of independent entities, both large and small.
As more companies include contract workers from other organizations in their work forces, people working side by side will belong to different legal entities.
the implications for organizational structures will be considerable, as workers respond to both the formal requirements of their organizations and the informal requirements of the immediate work group.
the physical boundaries of an organization will also be less observable because more organizations will decentralize their operations into remote areas.
physical location is already not an issue to many organizations that rely primarily on communication technologies.
companies that are mainly engaged in telemarketing and data entry have chosen to locate in small mid western towns.
for example, sitel Inc., an Omaha company that sells insurance and credit cards by phone, moved to Breda, Iowa (population 502), and hired 43 farmers` wives at $4 per hour to work its computers and phones.
the new jobs were welcomed in the community, which was hit hard by the farming slump, and the company saved labor costs.
the lean and mean prediction is a cautious one because of the proven resistance by organizations in the past to similar predictions.
for example, in 1958 Harold Leacitt and Thomas Whisler made predictions forecasting a reduction of middle management levels an a result of advances in computer technology.
thirty years of empirical research on the subject, however, raises doubts about the accuracy of this prediction.
organization it seems have remained resistant to radical changes in their structures, due in part to the political implications of structural change.
top managers have always enjoyed political support from large departments and staffs reporting to them.
while removing much of the weight of organizations may improve efficiency, institutionalized power bases may be threatened by such moves.
Clearly, computer technology will net cause organizations to be leaner and meaner, as Chapter 15 explained.
Rather, structural changes must receive the support or those with power to effect such change.
Decentralized and Entrepreneurial
lean and mean organizations with porous boundaries will benefit in the future from authority structures that are decentralized and entrepreneurial.
Business units will not be subject to tight controls, but will be responsible for their own performance.
by avoiding controls, large organizations will be further able to reduce administrative overhead costs.
Technology and well defined contractual agreements will make the necessary connections aming such units.
As competitive entities, these units will not be protected by the central organization, as struggling divisions used to be.
rather, their number and composition will change frequently, filling environmental niches that open temporarily and then being disbanded or spun off when their usefulness is outlived.
this type of structure will prove more effective than the matrix organization or large centralized bureaucracy.
Where business units fail, members can be recycled into new units where their talents are more needed.
Some writers on organizations in the future fell that culture and strong superordinate values will be the glue holding decentralized organizations together.
for example, Terrence Deal and Allan Kennedy described their "atomized" organization of the future in the following terms:
small, task focused work units (10 to 20 persons maximum).
each work unit with economic and managerial control over its own destiny.
units interconnected with larger entities through being computer and communications links.
units bonded into larger companies through strong cultural bonds.
as examples, Deal and Kennedy observe the trend toward franchising in industries like fast food and real estate.
strong culture at a McDonald`s or Century 21, they argue, provides the bonds needed to solidify corporate identity.
the winners in the business world of tomorrow will be the heroes who can forge the values and beliefs, the rituals and ceremonies, and a cultural network of storytellers and priests that can keep working productively in semiautonomous units that identify with a corporate whole.
our view is less influenced by the role of culture than by information technology and contractual agreements.
if organizations are to by truly entrepreneurial, they will require less dominating cultures, not more.
small entrepreneurial units must be free to design their own cultures and separate themselves from parent companies as much as possible.
franchising, from this perspective, is not a good model for encouraging true entrepreneurship.
Rather, it is a model for close control through air-tight legal requirements for franchise operation.
most areas of decision making (menus, pricing, advertising, sales) are controlled centrally.
while culture plays some role in standardizing McDonald`s restaurants throughout the world, legal contracts spell out the specific standards to be met by the franchise.
decentralized organizations must be prepared to honor subunit autonomy or lose the benefits that entrepreneurial subunits can bring.
a good example is the software group of Unimate, which bought its freedom from Westinghouse (see Chapter 14).
threatened by corporate policies that removed financial incentive for new product innovation, this group spun off and entered into new contractual relationships with Westinghouse as an independent unit.
strong cultures may serve well in organizations that require conformity to franchise agreements, but not in entrepreneurial organization in the future.
the role played by the central parent or host organization will be similar to the played by headquarters staffs in radically decentralized organizations today.
that is, central management will use its ownership resources to subsidize new ventures and to exercise financial control much like an internal corporate bank.
spinoffs and divestitures will still occur frequently, but the overall responsibility for corporate integrity will remain with headquarters management.
corporations can continue to be large and powerful using this design, but they can also be more responsive to environmental demands.
large size will continue to be advantageous, but decentralized entrepreneurial units within big companies will allow them to be flexible, also.
such structures are likely to find it difficult to maintain ethical conduct.
with radical decentralization comes the temptation that the ends justify the means and losses in the ability of corporate staffs to legislate or control moral action.
thus, corporate ethics will continue to be a problem, not easily solvable by lean, decentralized organization structures.
the most likely response to the value crises of the 1990s is the toughening of legal statutes governing corporate behavior.
beyond this, it is unclear what organizations will do to avoid breaches of corporate ethical conduct.
while changes in organizational culture would seem to be required, creating and sustaining such change is not simple.
clearly, ethics and values have already become important topics in business schools and corporate training programs.
developing the skills for separating short-term desires for money and wealth from longer term goals of a productive career will becomes important to management education as learning the jargon of Wall Street.
Higher education for managers will become a more important source of guidance on the ethical and value issues that they will face in the future.
in the absence of a simple "how to" book on education that draws on the arts and literature as well as business and economics.
multinational
the final characteristic of organizations in the future considered here is their international character.
this is an uncontroversial prediction because there is no doubt about the increasing globalization of business.
technology, in part, assures that information originating in one part of the world os disseminated to the rest of the world.
For examlpe, pictures of the soviet Chernobyl nuclear plant, taken by the French SPOT satellite, exposed the extent of this disaster to the world.
the event was one of a series leading to the Kremlin`s plkicy of glasnost, or openness, in the 1980s.
in a technological world, even the Russians cannot conceal what goes on inside their borders.
Analogously, in business there is no place for inefficient industries to hide, and organizations of the future will experience the gradual melting away of international borders and the protections they used to provide.
one specific implication of globalization os the need to customize products and services to different world markets.
many examples of effective customization can be offered to guide organizations in the future.
the following examlpe illustrates that globalization can provide more than just larger markets or cheaper places to produce.
customization of products for international markets allowed Boeing to gain product inroads that ultimately allowed it to the competition in domestic markets too.
up close
boeing
In 1968, boeing introduced its 737 aircraft as competition for McDonnell Douglas`s DC-9.
In the early 1970s, it was clear that toe 737 was not as fast as the DC-9, and because the DC-9 had a three-year headstart, it appeared unlikely that Boeing would compete successfully.
But rather than scrap the program, Boeing found new markets for the 737 by meeting the unique needs of Third World aviation.
The key was recognition that runways in developing countries were too soft, being made of asphalt instead of concrete, and too short to accommodate the 737 jet.
Boeing engineers redesigned the wings to permit shorter landings and added thrust for shorter takeoffs.
They also redesigned the landing gear and added low-pressure tires to prevent the bouncing they observed when the inexperienced pilots of developing countries airlines landed conventional aircraft.
The tires also reduced the loading on the asphalt surface and kept it from being torn up by landings.
As a result of exploiting the third-world market, orders of 737s were maintained, and ultimately the 737 became the best-selling commercial jet in aviation history.
such strategies indicate a true global approach to business, not a limited "multi-domestic" approach.
the key is to connect the business activities conducted in different nations.
the boeing example shows that the company did not make a completely different product for the developing countries.
Rather, the basic product was customizes for the international markets.
The structural designs appropriate for international organizations will not be radical departures from the designs considered previously in this book, particularly in Chapter 7.
The world product group works best when foreign managers participate as group leaders.
If such groups are dominated by U.S managers, the goals of global responsiveness may not be met.
international joint ventures, between competing firms housed in different countries, have already become a popular way to globalize ones business.
This collective strategy, which we analyzed in Chapter 10, can help a company to penetrate new regions and reduce the cost of developing manufacturing programs.
Auto companies, faced with large costs of building new plants, will create more joint ventures to reduce this problem.
In 1987, for example, Ford and Volkswagon formed Autolatina to make both VWs and Fords on the same assembly line.
Joint ventures, of course, require the cooperating parties to establish temporary truces to their normal competitive relationship, and these truces do not always last.
The joint venture, therefore, is a from that tends to be temporary due to fundamental mistrust between the parties.
Whatever the form and character of organizations in the future will be, it is clear that organization design will continue to influence their effectiveness.
Effective designs for organizations will help to ensure the success of industries and societies that depend on organizations for goods and services.
This chapter identifies specific challenges to those designers, particularly in the area of ethical and value dilemmas.
Responsible designers of tomorrow organizations will not simply be able to rely on models borrowed from the past.
they will need vision in anticipating the demands that the future will surely bring.
However, visionary managers will need a solid foundation in organization design before new forms can be considered.
managers who understand the needs of the future will be instrumental in shaping that future through their choices of organization designs.
SUMMARY
this chapter speculates on the nature of organizations in the future by identifying three force for change and three characteristics of organization design.
the first force for change is the environment, which will be more uncertain and resource-poor in the future.
Environmental demands will require organization to be more flexible but also more efficient than they are today.
the second force for change is technology, which will enable organizations to meet the new environmental demands.
information and production technologies will increase managers options for organization design, including the option of remote work.
Finally, human values and ethics will shape the future by indicating what we want.
the primary features of organizations in the future will be their lean and mean character, their decentralized and entrepreneurial structures, and their international focus.
these design features will enable even large organizations to be globally competitive by permitting both flexibility and efficiency.
both production and information technologies will largely be responsible for making these design features feasible.
a major question about organizations in the future is whether they will meet the ethical standards of society.
higher education for managers in the future should focus directly on ethical considerations in organizations.
future organizations in action
Cummins engine
Cummins engine Co.
is an independent manufacturer of diesel engines and related products and services.
Cummins engines power about 60 percent of the big trucks in the United States.
between 1950 and 1975 the U.S domestic market for trucks grew explosively, and the company limited its international activities to a few countries like Canada, Mexico, the United Kingdom. and India.
During the latter half of the 1970s, Cummins adopted an international focus.
Four major reasons were cited:
1. a look for new market opportunities outside the United States, especially within newly industrialized countries with a developed infrastructure and large transportation needs.
2. a search for high-quality, low-cost sources for forgings, casting, and machined components.
3. excess and obsolete capacity in the diesel engine industry was being eliminated.
4. foreign competition from European and Japanese companies (Volvo, Mercedes Benz, Komatsu, Hino) was increasing.
Cummins defense against the threat of foreign competition included three components: product, price / costs, and performance.
it spent nearly $1 billion on product development between 1980 and 1985 to develop what it considered the best performing diesel engine in the world.
on prices and costs, Cummins decided to meet all world prices, which in some cases were as much as 30 percent below Cummins prices.
the strategy was to increase market share even though it was uncertain whether or not toe company could be profitable at those levels.
Finally, Cummins engaged in a performance program, called new standards of excellence, that focused employee attention on quality, cost, and delivery time goals.
each area of goals was set following a close examination of global competition.
On-site visits in Japan and Europe familiarized Cummins managers with what the competition was doing.
as a result of these moves, Cummins achieved the results it wanted.
it lost no domestic business to foreign competition, its market share grew, and it successfully penetrated international markets.
on the down side in short term profits because of price reductions and the costs of developing new products.
after profit bottomed out, recovery ensued through cost cutting and plant closings.
many jobs were lost as the goal of becoming globally competitive forced further cost reductions.
as markets became less restrictive all over the world, controlling costs proved to be an ongoing obsession rather than a transitional tactic to achieve globalization.
The development and maintenance of information system will be taken over largely by the users themselves because information technology will become easier to configure and use.
many required technical skills will be "out sourced." along with other staff functions, to small companies or consultants who will serve organizations on a contract basis.
organizations will save money by avoiding the need for permanent staffs will expensive benefits.
This will mean that the boundaries of organizations will often be hard to discern with an increase of joint venturing and out sourcing, the work of organizations will be shared by a number of independent entities, both large and small.
As more companies include contract workers from other organizations in their work forces, people working side by side will belong to different legal entities.
the implications for organizational structures will be considerable, as workers respond to both the formal requirements of their organizations and the informal requirements of the immediate work group.
the physical boundaries of an organization will also be less observable because more organizations will decentralize their operations into remote areas.
physical location is already not an issue to many organizations that rely primarily on communication technologies.
companies that are mainly engaged in telemarketing and data entry have chosen to locate in small mid western towns.
for example, sitel Inc., an Omaha company that sells insurance and credit cards by phone, moved to Breda, Iowa (population 502), and hired 43 farmers` wives at $4 per hour to work its computers and phones.
the new jobs were welcomed in the community, which was hit hard by the farming slump, and the company saved labor costs.
the lean and mean prediction is a cautious one because of the proven resistance by organizations in the past to similar predictions.
for example, in 1958 Harold Leacitt and Thomas Whisler made predictions forecasting a reduction of middle management levels an a result of advances in computer technology.
thirty years of empirical research on the subject, however, raises doubts about the accuracy of this prediction.
organization it seems have remained resistant to radical changes in their structures, due in part to the political implications of structural change.
top managers have always enjoyed political support from large departments and staffs reporting to them.
while removing much of the weight of organizations may improve efficiency, institutionalized power bases may be threatened by such moves.
Clearly, computer technology will net cause organizations to be leaner and meaner, as Chapter 15 explained.
Rather, structural changes must receive the support or those with power to effect such change.
Decentralized and Entrepreneurial
lean and mean organizations with porous boundaries will benefit in the future from authority structures that are decentralized and entrepreneurial.
Business units will not be subject to tight controls, but will be responsible for their own performance.
by avoiding controls, large organizations will be further able to reduce administrative overhead costs.
Technology and well defined contractual agreements will make the necessary connections aming such units.
As competitive entities, these units will not be protected by the central organization, as struggling divisions used to be.
rather, their number and composition will change frequently, filling environmental niches that open temporarily and then being disbanded or spun off when their usefulness is outlived.
this type of structure will prove more effective than the matrix organization or large centralized bureaucracy.
Where business units fail, members can be recycled into new units where their talents are more needed.
Some writers on organizations in the future fell that culture and strong superordinate values will be the glue holding decentralized organizations together.
for example, Terrence Deal and Allan Kennedy described their "atomized" organization of the future in the following terms:
small, task focused work units (10 to 20 persons maximum).
each work unit with economic and managerial control over its own destiny.
units interconnected with larger entities through being computer and communications links.
units bonded into larger companies through strong cultural bonds.
as examples, Deal and Kennedy observe the trend toward franchising in industries like fast food and real estate.
strong culture at a McDonald`s or Century 21, they argue, provides the bonds needed to solidify corporate identity.
the winners in the business world of tomorrow will be the heroes who can forge the values and beliefs, the rituals and ceremonies, and a cultural network of storytellers and priests that can keep working productively in semiautonomous units that identify with a corporate whole.
our view is less influenced by the role of culture than by information technology and contractual agreements.
if organizations are to by truly entrepreneurial, they will require less dominating cultures, not more.
small entrepreneurial units must be free to design their own cultures and separate themselves from parent companies as much as possible.
franchising, from this perspective, is not a good model for encouraging true entrepreneurship.
Rather, it is a model for close control through air-tight legal requirements for franchise operation.
most areas of decision making (menus, pricing, advertising, sales) are controlled centrally.
while culture plays some role in standardizing McDonald`s restaurants throughout the world, legal contracts spell out the specific standards to be met by the franchise.
decentralized organizations must be prepared to honor subunit autonomy or lose the benefits that entrepreneurial subunits can bring.
a good example is the software group of Unimate, which bought its freedom from Westinghouse (see Chapter 14).
threatened by corporate policies that removed financial incentive for new product innovation, this group spun off and entered into new contractual relationships with Westinghouse as an independent unit.
strong cultures may serve well in organizations that require conformity to franchise agreements, but not in entrepreneurial organization in the future.
the role played by the central parent or host organization will be similar to the played by headquarters staffs in radically decentralized organizations today.
that is, central management will use its ownership resources to subsidize new ventures and to exercise financial control much like an internal corporate bank.
spinoffs and divestitures will still occur frequently, but the overall responsibility for corporate integrity will remain with headquarters management.
corporations can continue to be large and powerful using this design, but they can also be more responsive to environmental demands.
large size will continue to be advantageous, but decentralized entrepreneurial units within big companies will allow them to be flexible, also.
such structures are likely to find it difficult to maintain ethical conduct.
with radical decentralization comes the temptation that the ends justify the means and losses in the ability of corporate staffs to legislate or control moral action.
thus, corporate ethics will continue to be a problem, not easily solvable by lean, decentralized organization structures.
the most likely response to the value crises of the 1990s is the toughening of legal statutes governing corporate behavior.
beyond this, it is unclear what organizations will do to avoid breaches of corporate ethical conduct.
while changes in organizational culture would seem to be required, creating and sustaining such change is not simple.
clearly, ethics and values have already become important topics in business schools and corporate training programs.
developing the skills for separating short-term desires for money and wealth from longer term goals of a productive career will becomes important to management education as learning the jargon of Wall Street.
Higher education for managers will become a more important source of guidance on the ethical and value issues that they will face in the future.
in the absence of a simple "how to" book on education that draws on the arts and literature as well as business and economics.
multinational
the final characteristic of organizations in the future considered here is their international character.
this is an uncontroversial prediction because there is no doubt about the increasing globalization of business.
technology, in part, assures that information originating in one part of the world os disseminated to the rest of the world.
For examlpe, pictures of the soviet Chernobyl nuclear plant, taken by the French SPOT satellite, exposed the extent of this disaster to the world.
the event was one of a series leading to the Kremlin`s plkicy of glasnost, or openness, in the 1980s.
in a technological world, even the Russians cannot conceal what goes on inside their borders.
Analogously, in business there is no place for inefficient industries to hide, and organizations of the future will experience the gradual melting away of international borders and the protections they used to provide.
one specific implication of globalization os the need to customize products and services to different world markets.
many examples of effective customization can be offered to guide organizations in the future.
the following examlpe illustrates that globalization can provide more than just larger markets or cheaper places to produce.
customization of products for international markets allowed Boeing to gain product inroads that ultimately allowed it to the competition in domestic markets too.
up close
boeing
In 1968, boeing introduced its 737 aircraft as competition for McDonnell Douglas`s DC-9.
In the early 1970s, it was clear that toe 737 was not as fast as the DC-9, and because the DC-9 had a three-year headstart, it appeared unlikely that Boeing would compete successfully.
But rather than scrap the program, Boeing found new markets for the 737 by meeting the unique needs of Third World aviation.
The key was recognition that runways in developing countries were too soft, being made of asphalt instead of concrete, and too short to accommodate the 737 jet.
Boeing engineers redesigned the wings to permit shorter landings and added thrust for shorter takeoffs.
They also redesigned the landing gear and added low-pressure tires to prevent the bouncing they observed when the inexperienced pilots of developing countries airlines landed conventional aircraft.
The tires also reduced the loading on the asphalt surface and kept it from being torn up by landings.
As a result of exploiting the third-world market, orders of 737s were maintained, and ultimately the 737 became the best-selling commercial jet in aviation history.
such strategies indicate a true global approach to business, not a limited "multi-domestic" approach.
the key is to connect the business activities conducted in different nations.
the boeing example shows that the company did not make a completely different product for the developing countries.
Rather, the basic product was customizes for the international markets.
The structural designs appropriate for international organizations will not be radical departures from the designs considered previously in this book, particularly in Chapter 7.
The world product group works best when foreign managers participate as group leaders.
If such groups are dominated by U.S managers, the goals of global responsiveness may not be met.
international joint ventures, between competing firms housed in different countries, have already become a popular way to globalize ones business.
This collective strategy, which we analyzed in Chapter 10, can help a company to penetrate new regions and reduce the cost of developing manufacturing programs.
Auto companies, faced with large costs of building new plants, will create more joint ventures to reduce this problem.
In 1987, for example, Ford and Volkswagon formed Autolatina to make both VWs and Fords on the same assembly line.
Joint ventures, of course, require the cooperating parties to establish temporary truces to their normal competitive relationship, and these truces do not always last.
The joint venture, therefore, is a from that tends to be temporary due to fundamental mistrust between the parties.
Whatever the form and character of organizations in the future will be, it is clear that organization design will continue to influence their effectiveness.
Effective designs for organizations will help to ensure the success of industries and societies that depend on organizations for goods and services.
This chapter identifies specific challenges to those designers, particularly in the area of ethical and value dilemmas.
Responsible designers of tomorrow organizations will not simply be able to rely on models borrowed from the past.
they will need vision in anticipating the demands that the future will surely bring.
However, visionary managers will need a solid foundation in organization design before new forms can be considered.
managers who understand the needs of the future will be instrumental in shaping that future through their choices of organization designs.
SUMMARY
this chapter speculates on the nature of organizations in the future by identifying three force for change and three characteristics of organization design.
the first force for change is the environment, which will be more uncertain and resource-poor in the future.
Environmental demands will require organization to be more flexible but also more efficient than they are today.
the second force for change is technology, which will enable organizations to meet the new environmental demands.
information and production technologies will increase managers options for organization design, including the option of remote work.
Finally, human values and ethics will shape the future by indicating what we want.
the primary features of organizations in the future will be their lean and mean character, their decentralized and entrepreneurial structures, and their international focus.
these design features will enable even large organizations to be globally competitive by permitting both flexibility and efficiency.
both production and information technologies will largely be responsible for making these design features feasible.
a major question about organizations in the future is whether they will meet the ethical standards of society.
higher education for managers in the future should focus directly on ethical considerations in organizations.
future organizations in action
Cummins engine
Cummins engine Co.
is an independent manufacturer of diesel engines and related products and services.
Cummins engines power about 60 percent of the big trucks in the United States.
between 1950 and 1975 the U.S domestic market for trucks grew explosively, and the company limited its international activities to a few countries like Canada, Mexico, the United Kingdom. and India.
During the latter half of the 1970s, Cummins adopted an international focus.
Four major reasons were cited:
1. a look for new market opportunities outside the United States, especially within newly industrialized countries with a developed infrastructure and large transportation needs.
2. a search for high-quality, low-cost sources for forgings, casting, and machined components.
3. excess and obsolete capacity in the diesel engine industry was being eliminated.
4. foreign competition from European and Japanese companies (Volvo, Mercedes Benz, Komatsu, Hino) was increasing.
Cummins defense against the threat of foreign competition included three components: product, price / costs, and performance.
it spent nearly $1 billion on product development between 1980 and 1985 to develop what it considered the best performing diesel engine in the world.
on prices and costs, Cummins decided to meet all world prices, which in some cases were as much as 30 percent below Cummins prices.
the strategy was to increase market share even though it was uncertain whether or not toe company could be profitable at those levels.
Finally, Cummins engaged in a performance program, called new standards of excellence, that focused employee attention on quality, cost, and delivery time goals.
each area of goals was set following a close examination of global competition.
On-site visits in Japan and Europe familiarized Cummins managers with what the competition was doing.
as a result of these moves, Cummins achieved the results it wanted.
it lost no domestic business to foreign competition, its market share grew, and it successfully penetrated international markets.
on the down side in short term profits because of price reductions and the costs of developing new products.
after profit bottomed out, recovery ensued through cost cutting and plant closings.
many jobs were lost as the goal of becoming globally competitive forced further cost reductions.
as markets became less restrictive all over the world, controlling costs proved to be an ongoing obsession rather than a transitional tactic to achieve globalization.
