Excerpt
from:
Managing the Evolving Corporation
Chapter 1: Structure Becomes Process, page 3
There are laws
that govern many aspects of a corporation's existence, but by far the
majority of the decisions that are made in the process of creating one
are a matter of choice. Thus, a corporation is something which is designed,
with all of the opportunities and risks inherent in this uniquely human
process.
For the last one hundred years, however, it has been widely assumed that
the design of a corporation must be based on the model of the command
and control hierarchy. Designing this organization has simply been a matter
of naming the required departments and arranging boxes in a pyramid. This
hardly qualifies as a process of design at all, any more than drawing
a mustache on a copy of the Mona Lisa constitutes making a new work of
art. Yet just this practice has passed as organization design for many
decades, and a standard hierarchical model has been taught to and implemented
by generations of executives.
Structure
The corporate pyramid is described as an organizational structure,
and one of the most important attributes of this structure, as with all
structures, is its durability. It is valued for its strength and rigidity,
its ability to resist change and to stand unscathed by the passage of
time and the most powerful of storms.
A command and control structure is meant to be as rigid as a building,
and to resist change by defining behavior patterns through which authority
and responsibility are allocated. The patterns that are perhaps most pervasive
are rewards for success and punishment for failure, and since these two
kinds of feedback are also the most powerful, their continuing influence
sustains the corporate structure.
Because these rewards and punishments come from within, they do not necessarily
pertain to anything that an individual might have accomplished in the
marketplace: organizational structure is designed to minimize the impact
of whatever happens outside. Former GE board member Walter Wriston commented
about salaries in the company: "It didn't make a hell of a lot of
difference if the guy had just screwed up or invented Lexan. You'd take
the size of the guy's shirt collar and divide it by the Gregorian calendar
and multiply it by the square root of pi, and you'd come out with a number
that was totally meaningless." (Tichy, Noel M. and Stratford Sherman, Control Your Destiny or Someone Else Will. New York, Currency Doubleday,
1993. p. 38)
Although this pattern of ignoring external reality has the benefit of
protecting the organization from ephemeral shifts in the wind, it also
isolates people from real feedback about whatever they're doing. Since
the important feedback that they do get is from higher corporate authorities,
their responses are conditioned according to the needs and perceptions
of those in the hierarchy itself. Thus, events in the marketplace are
discounted, while events in the hierarchy are amplified.
It is for this reason that command and control hierarchies lose their
focus on the market and begin to confuse their own perceptions of the
world with reality: "Many of GE's best managers devoted far more
energy to internal matters than to their customers' needs. As GEers sometimes
expressed it, theirs was a company that operated, 'with its face to the
CEO and its ass to the customer.'" (Tichy, Noel M. and Stratford
Sherman, Control Your Destiny or Someone Else Will. New York, Currency
Doubleday, 1993. p. 6)
The pattern of relationships that leads to this kind of behavior is known
as 'corporate culture', and it is the very embodiment of an organization's
resistance to change. After all, a culture is a culture precisely
because it resists change in order to reproduce itself ad infinitum, maintaining
its cohesiveness and its identity despite all challenges.
This is inherently problematic in a changing marketplace, because a corporation's
very rigidity suppresses its ability to adapt. Eventually, when the forces
of calamitous change finally do overwhelm a structure, it does not fail
gracefully or gently, but catastrophically, collapsing into a pile of
rubble.
Thus, modifications to rigid structures are complicated, time-consuming
and very expensive: "Hoping to cure itself with one last, huge gulp
of bitter medicine, IBM yesterday announced an $8 billion second-quarter
loss and the elimination of another 35,000 jobs by the end of 1994. IBM's
loss ... arises mainly from $8.9 billion in extraordinary charges to cover
layoffs, plant closings, and other current and future efforts to shrink
the struggling company." ("IBM Loses $8 billion, 35,000 Jobs."
San Francisco Chronicle, July 28, 1993.)
Unfortunately for IBM and so many other corporations, the real problem
isn't the old structure or the new structure. The problem with the command
and control model is its reliance on the very concept of structure
itself. We are trapped in a mindset of 'structure' that prevents organizations
from adapting to the reality of the marketplace.
Excerpts
from Managing the Evolving Corporation
