comes a day in the life of every car when tune-ups are no longer
sufficient to cover problems. When patches can’t fix systemic flaws
and keep the car running smoothly. Christopher Bartlett, Harvard
Business School professor, author, consultant, and organizational
mechanic-extraordinaire says that day is here for many companies.
He is calling for nothing less than a complete engine overhaul for
today’s larger, established organizations.
caught up with Bartlett and asked him about his vision of the future,
and how the old boxy-sedan organizations of today need to transform
into responsive, intelligent, and efficient roadstersor
risk ignominious death on the scrap heap. Bartlett tells us that
organizations have to recognize their partstheir
peopleare critical to the success of the whole. They have
to create an environment that makes the most of each individual’s
knowledge and skills. And they should start by replacing old doctrines
with a new management philosophy that emphasizes purpose and process,
not strategy and structure. Only then can they move beyond direction
and control toward freedom and better organizational performance.
After all, whether in the Old Economy or the New, a smooth, high-performance
ride is what we’re all after.
Right now we are
experiencing the biggest change in the corporate model in 75 years.
In a world filled with big changes, this is a huge one. It portends
not just a radical restructuring of the structural form, but also
a major transformation in the nature of managerial work. A whole
set of forcestoday’s
usual suspects, including globalization, the information age, the
service economy, deregulation, and the knowledge revolutionare
Start-ups get off
pretty easily in this revolution. They can build and invent themselves
around the new forces. The real challenge is for large corporations,
with their embedded technology, people, and organizational models.
How do they transform themselves? Unless companies see this as a
systemic issue, they’ll continue to try fine-tuning at the marginstinkering
with the enginerather
than understanding that a whole systemic modeling change is happening.
In effect, the engine has to be replaced.
The Old System
No Longer Works
To understand where
the world is moving, it helps to understand where we are coming
from. Look around you. The organization that many of you are in
right now is the corporate model that’s driven us for 75 years.
And it’s what we now have to pull apart.
We’re coming from
a corporate model based on 3 S’s: Strategy, Structure, and Systems.
Strategy was set by allocating the scarce resource (capital).
Structure was designed to hold units accountable (divisionalized).
Systems provided the means for the elaborate planning and control
process to work.
The integrated model
created clear management roles and responsibilities based on delegation
and control. Top management were strategic resource allocators who
managed scarce capital resources, allocated them across competing
needs, then measured, evaluated, and controlled them. Middle management
managed the process that supported top management’s activities.
They sent the capital budgets up; they controlled against the objectives
top management sent down. Front line managers were the operating
implementers who lived within the budgets and controls of the top
So What Happened
That Made Change Imperative?
For one, all those
New Economy forces began converging. But at the heart of the corporate
model transformation is a fundamental change in the scarce
strategic resource companies need.
Strategic Resources are Information, Knowledge, and Expertise
scarce resource is no longer capital. Quite the opposite, since
most companies today are awash in capital. It is now information,
knowledge, and expertise. In essence, it’s people and the processes
that link them to leverage their know-how.
This simple fact
is undermining everything we know about the organizational model
and changing the game completely. As a result, the control-based
Strategy, Structure, and Systems processes that drove the old model
are inadequate today. Consider this:
- Before, capital
could be accumulated at the corporate level and allocated. Now,
knowledge and expertise are diffused throughout the organization
and controlled by front line employees, leaving organizations
very vulnerable. The critical strategic resource walks out the
door each night. And people are a lot more difficult to control
and predict than capital!
- Before, capital
could be allocated down on the basis of budgets and systems. Now
learning is developed through front line experimentation and cross-organizational
interaction. Indeed, that’s become the critical process, not measuring
and controlling capital.
- It used to be
that you could evaluate performance on the basis of financially
driven performance and control systems. Now, we don’t have the
ability to measure the creation, implementation, diffusion, and
operationalization of knowledge.
Shift From a Corporate
Mentality Driven by Strategic Planning
With all of these
organizations competing for information, knowledge, and expertiseessentially,
corporate competitive advantage resides in the people in the company
and the organizational capability that’s built around them. Organizations
need to change the way they operate.
How are companies
are simply tweaking the tired framework. Tinkering with the engine.
Consultants and academics are enjoying a field day amid loud cries
of "What do we do?" emanating from organizations. Witness
the abundance of tools and techniques that companies desperately
grasp such as reengineering, core process redesign, retention management.
The list of tools and techniques, as most of us can attest, is extensive.
Many companies are building up their infrastructure in sophisticated
information systems, knowledge transfer processes and networks,
and communities of practice.
Yet all these investments
are wasted. They are focusing on systems and technology, while companies
don’t attract, retain, and motivate people. So most organizations
are leaking the talent the systems are built for!
Move Beyond the
At the heart of the
transformation has to be a move beyond the Strategy, Structure,
Systems philosophy to a broader philosophy that’s based on Purpose,
Process, and People. Notice we are not moving "from-to",
but rather "beyond." This is about hard-nosed organizational
designs that still have Strategy, Structure, and Systems in place,
but recognize that these elements alone are no longer sufficient.
mind-shifts are crucial.
From Strategy to Purpose - In order to create organizational
learning, companies have to create a sense of shared purpose and
belonging for all individuals.
Companies are no
longer simply economic enterprises. Managers must create and manage
companies as social institutions as well. It’s no small order,
but top management must convert the contractual employee
of an economic entity into a committed member of a purposeful
- Attracting a scarce
resource-smart, capable people-depends increasingly
on creating not just a place where they come to work, but a place
where they can belong, especially in a world where so many social
institutions (communities, neighborhoods, families) are dysfunctional
or completely broken down.
- The heart of creating
an environment where learning can take place is creating an internal
environment where people can and do relate to each otherformally
and informally. Social networks are the key link in developing
and diffusing expertise through the organization.
Structure to Process.
is not just a hierarchy of tasks and responsibilities, but also
a portfolio of flexible roles and relationships. The main task of
the organization is to shape behaviors of people and create an environment
that enables them to take initiative, cooperate, and learn. Formal
organization charts are no longer the issue. Now, linking assets
and resources through redefined relationships is key.
From Systems to People - Restructure systems to reflect the
new source of competitive advantage.
The old system was
structured to measure, evaluate, and reward people around financial
measures. Not surprisingly, people were viewed and treated as costs.
Now, with people
the source of competitive advantage, Human Resources is the critical
function in today’s organization. HR practices and policies should
no longer be abrogated to some functional unit miles away from the
CEO. The chief HR officer, along with the learning and knowledge
management officers, should be literally and figuratively close
to the CEO, with equal (if not greater) standing than the financial
can learn to attract, motivate, develop, and retain superior peopleand
build a community where these people can leverage their knowledge
else they do is supplemental. Transforming organizations relies
upon transforming human behavior. Creating an organization based
on self-discipline, trust, and support is about creating this behavioral
People are the foundation
on which all of this is built. The most sophisticated systems and
technical structures will be completely wasted if there’s leakage
of talent, a demotivated workforce, or a culture that doesn’t support
sharing of knowledge.
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, including (coauthored with Sumantra Ghoshal) The Individualized
Corporation: A Fundamentally New Approach to Management, HBS
Press, 1997, and
Managing Across Borders: The Transnational Solution, HBS Press,
1989. In addition to his academic responsibilities, he maintains
ongoing relationships with several major corporations, serving both
as a board member and as a consultant/management advisor.
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