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It's time for new thinking for a new age.

Basic to change is the ability to understand a logic that is different from the traditions that have fueled the organizations of the past. The critical questions facing organizational management in today's world are those that deal with and differentiate the changing values, beliefs and concepts from those that have been traditional in American management and organizations. Organizations of the past and those of the future will be markedly different. In order to survive and flourish, organizations of the future must move from the primacy of self-interest and power to greater cooperation between management and labor.

These organizations must make a place for the entrepreneurial spirit as well as skills, information, and competence outside the control of management. The future organization must recognize that traditional decision-making becomes inefficient when the tasks of deciding, information gathering and implementation all rest in different hands. The organization's environment will change as well. Government and business must reach an intermediate condition, one between laissez-faire and dominance.

It is becoming obvious that societal forces are necessitating a rethinking of the relationship between private and public resources; as a result, private interests will begin to coincide with the public good. These are changes that are seen on the horizon. However, mere awareness is insufficient to enact organizational change. Past efforts at changing organizations have routinely been met with "lip service." In attempting to cure the ills of low productivity, poor quality and sinking morale and commitment, organizations borrow the remedies of others. Unfortunately, these remedies frequently involve "more than meets the eye." They represent and necessitate changes in managerial thinking that in the past, successfully guided American industry. Making such changes will be difficult because they involve changing not only ideas but the very structure, form and processes of organizational functioning.

New Forms of Meaning

An attempt must be made to shift from limited traditional managerial thinking to modern thinking. The framework is structured to define both types of organizations and to work in the broader context of cooperative productivity as opposed to power. It de-emphasizes the isolated functioning of individuals and attempts to point to the need for "binding" goals within current organizations, divisions, departments, groups, and individuals. Managing the modern organization requires principles of integration and development in which products, processes, markets, technology, services, and people signify more important realities than power, order, and conformity.[1]

Principles of reciprocity are marked by attempts to blend the interests of individuals and groups, groups and departments, departments and organizations, and finally, organizations and society. The model is a cooperative design quite different from the exclusive emphasis of the individual competitive economic model. The individual, the group, and the organization are designed as a social model that represents organizational and personal connections. This becomes the context for the definitions of work, decision-making, reward and promotion, productivity, return on investment, reinvestment in capital goods, corporate and social well-being, and accountability and responsibility.

This perspective attempts to provide a framework for: the new technology, needed quality, modern work, the current workforce, and cooperative relationships essential for success to operate a productive organization in a changing environment for the fulfillment of the goals of the organization.

Modern Formulas

These principles and orientations are "modern formulas" that recognize change as being distinct from the ideological base of traditional beliefs. In this sense, they are unformed as they respond to the realities of a new environment.

The emphasis is on the international marketplace and the world product, the new arena of organizational success or failure:

1. The workforce is defined in the context of white collar, male and female, more highly educated and socially experienced, with a value-set of personal decision power.

2. Competition is an international reference point with corporate power concentrated within industries, necessitating different relationships between business and government.

3. There is a need to unite goals that bind the business to its industry in order to act on sets of principles that take precedence over self-interest. In a way, these goals are similar to those a nation invokes in the context of national defense (a common goal) and are necessary for survival.

International competition threatens the continuation of major domestic industries, large workforces, and regional survival. Therefore, broader frameworks for analyzing our organizational structures, managerial systems, and industrial bases are imperative. The student of organization needs to be provided this perspective on organizational effectiveness and change.

Two very important groups of people must rethink the organizational reality: corporate executives, in terms of looking at their firms in both a competitive and international context, and students of organization and business who are preparing for organizational and corporate management. The purpose is to blend the academic tradition with the organizational environment being experienced by the organization's executives, managers and employees. The goal is to provide a framework for the comprehension, as well as the development, of new pragmatic formulas for organizational design, structure, and function.

The major issue to be solved is not how to make people more motivated, dedicated, or productive - because that is the desire of most people - but rather, how to design organizations that provide opportunities for motivation, productivity, and dedication in order to achieve higher levels of organizational output and a higher-capacity workforce. Direct influence upon the individual to increase motivation or commitment may not even be possible or, if possible, not sustainable without concomitant changes in the organizational structure and managerial philosophy.[2]

There is also a need to reverse the trends in executive training away from a total reliance on analytical, scientific information toward decision-making and goal-setting for the new social-technological-cultural environment of the firm and its activities.

The "idea-set" or underlying managerial philosophy of the leaders of organizations is overwhelmingly more important than the techniques or "how-to" approaches (gimmicks or fads) to organizational functioning. The strength of a corporate set of ideas - directing and moving an organization - has more meaning than any set of techniques that comes from a confused or borrowed organizational culture. A technique structured to make people "feel" that they are productive has little meaning in an organization that does not define people as productive. It is futile to use cherry-picking techniques from other successful organizations without adopting the underlying principles of assumptions that guided the development of those techniques. This fact frequently has been shown in situations in which quality circles have been quickly adopted and as quickly dropped because the prerequisite "idea-set" of participative management, employee involvement, and the value of a fully functional person were not also adopted or the organization was not designed to support the change, e.g., the requirement of an integrated participative structure necessitated by the quality-circle program.[3] Value is in the structure of "ideas" and the functional designs based upon those ideas. It is not merely present in a technique.

The Categorical

Imperatives of Change

Figure One charts the changes that have been occurring within the world of work and organization since 1920. These changes effect definitions of both the organization and the people who work. However, a critical analysis of the functioning principles of the organization indicate that neither the ideas of functional organizational principles nor the significance of modern work has been developed into accepted modern principles of organization and work.

Clearly each of these changes represents a need for structural redefinitions. Old forms are designed for old work; new work requires new forms. For example, physical work (an assembly line, digging a ditch) can be highly supervised and controlled, but mental work and skilled work require the internal control and self-discipline of the people doing the work.[4] Management performs the auxiliary role of service and support rather than the direct role of control and supervision. Hard work is a "physical" notion of labor, but modern work is less physical and, in this sense, is not correlated with the physical output of energy. However, the costs of this rethinking and redesign cannot be minimized because the output of work does not have the traditional sign posts of physical action. Safe harbors disappear as the organization accepts the ambiguity (uncertainty) that inevitably is involved in doing things differently and thinking differently.

The attempt to transfer old principles of management and organization to new work is bound to produce lower levels of output because the management principles (and language) are not designed for new work (the service economy). Therefore, management theory must be rethought in terms of providing service and support to employees rather than exercising power and control over them. This is a radical change from the principles of management and the traditional structure and functions of management. Illustrations of this shift can be witnessed in the computer and auto industry. Motivated by international competition, Digital Equipment Corporation redesigned its Enfield, Connecticut facility to create a "high quality human environment."[5] Digital's primary mission was to tap resources that the traditional organizational design did not realize. The "idea-set" underlying the sociotechnical redesign at Enfield was the increasing necessity to involve people in the decisions that affect their day-to-day work. The result was that people became empowered to enact their ideas. From this perspective, every employee became a manager.

In the Toyota and GM joint venture project, one major obstacle to success at their Fremont California facility was the traditional adversarial management-union relationship that had historically plagued the auto industry. In an interesting account, the management-union relationship was drastically changed to one of mutual trust and cooperation. As Bruce Lee, United Auto Workers Regional Director, put it in discussing their new labor agreement, "In [this agreement] the parties agree to share all the risk, responsibility and reward of partnership."[6]

Figure Two outlines the differences between the old ideological reference point to work and the modern role of management in response to the changed nature of the work environment.

However, what is critical in this move from ideology to modern practice is the need to redesign the structure of the organization in such a way that a critical path for new behavior is required. The emphasis is not on changing people but changing the structure that creates different behavioral expectations. The attempt to "change people" without a change in structure will inevitably result in failure because the structure designed for an old environment contradicts the new behavioral requirements. Many pundits have provided definitions of what motivates and concerns people (Maslow, Argyris, Drucker, and Herzberg) who are non-functional in existing bureaucracies. They are nonfunctional because these definitions are incongruent with traditional forms of organizations. The application of these definitions in such old organizational forms, inconsistent with these new conceptualizations of people, rarely meet with the success intended.

The necessity for such a change is similar to Harvard Professor John Kenneth Galbraith's 1977 discussion of organizational design. From his perspective, organizational design is conceived as a congruence or fit between the organization's environment and the three features of strategy, organizing mode (structure) and the mechanisms for integrating people into the organization.

The Economics of Balance

Because business organizations function within society, it is becoming more important to reassess the relationships, meanings, and definitions of business in a complex environment. Pure models of meaning are difficult to support in environments in which these models are not practical. One such model is that of "pure competition." To assume perfect competition (a world of supply and demand made up of many buyers and sellers) has little meaning in an environment where significantly large sectors of the economy are moving toward concentration, and oligopoly and practical monopoly indicate the contradiction between theory and practice. Namely, the theory is flawed insofar as it is built on non-functional meaning.

The pretense that business is comprised of small and competitive units yields to the reality that a comparatively small number of enterprises control an overwhelming amount of productive assets and gross receipts from sales. For example, in 1989 the largest 500 industrial corporations accounted for more than 97 percent of the productive assets and 77 percent of the total profits in manufacturing. These large enterprises are competing with other similar enterprises, not only in domestic markets but in international markets as well.

Figure Three indicates a more realistic approach to business as an economic reality. Namely, society is becoming more dependent on the success of large organizations, and small organizations are playing less and less of a significant role in the economic well-being of the society as a whole.

Figure Four is a corollary of Figure Three when business, because of its size and power, represents an inequality of relationships. Both the internal and external environments of organizations influence the organization. The simple formulas of shareholder wealth are less compelling when the actions and behaviors of an organization have a significant impact on the environments beyond shareholders. The influences on public wealth and public health require organizational designs that are responsible to broad ranges of constituency. The social-legal developments of the 1960s and 1970s are witness to these changes. The recent savings and loan problems indicate the relationship between size and public impact.

The Modern Organization

The international environment of business is making some aspects of organization very clear:

1. Because of competitive wage and cost structures developing countries are capable of competing more efficiently in basic manufacturing types of business.

2. Mass production industries must utilize technology substitution to hold on to markets in specialized areas.

3. The ability to shift technology from high cost nations to low cost nations is making visible a new concept in manufacturing. Namely, the process of manufacturing can take place anywhere. However, the critical wealth created by manufacturing is coming from the "business services" in manufacturing-research, design, financing, distribution and services. Manufacturing wealth is created less in the actual production and more in the design and implementation leadership. Examples of this are Intel, AT&T and Apple Corporation.

4. Employment has shifted to service-oriented areas, many of which are dependent on skill, knowledge and information.

5. Modern workers require the right to make decisions that affect their work. Such decision-making power on the operational level has become a necessary ingredient of organizational survival as well as success.

6. The organization's constituency and accountability lie beyond the exclusive concern for shareholders.

7. The role of government will continue to rise in visibility with the growth in business size. (This is the universal experience across nations.) The public stake in corporate enterprise represents the inseparable relationship of public wealth and health and corporate outcomes.

Each of these changes is already taking place. However, the idea sets (or mind sets) of people who manage, work, own, and operate within organizations have been much slower to change. This is what sociologists call culture lag. The ability to be proactive requires that an organization redesign its structure to positively incorporate these changes into the formal and informal operations of its systems. This has been clearly indicated by the Toyota-GM joint venture, in which the strength of the new relationship between management and labor is given meaning from the reinforcement of this new culture by a congruent structure and systems. There is no question that its success in labor relations is due to the "harmony and consistency among the culture, structure, and systems ... everything depends on everything else."7

The challenges to modern management lie in the ability to understand that:

1 .The critical problems facing their organizations do not lie in ineffective people, but rather, people who are rendered ineffective by outmoded organizational structures and designs.

2. Many of the problems that exist within organizations are those created by the structures and environments outside these organizations.

3. Power is less persuasive when used as a mode of managerial control, in which people have skills, deliver services, and develop information, than when it is used to control people engaged in physical or manual work. The basis and use of power are changing within the organization from one of hierarchy or position to one that of knowledge, skill, and commitment to a common purpose.

4. Modern wealth will be developed from the skill, knowledge, and expertise of a well educated workforce.

5. People work for more than money and, therefore, are motivated by the use of their knowledge, skill, and internal rewards. They expect money but define their productivity in terms that management may support but does not control.

Organizations are gradually realizing this and are structuring work to provide opportunities for such growth. Some organizations, i.e., Digital and Johnsonville Sausage, are even restructuring their compensation systems to reward development of additional skills. just such an awareness on the part of Digital's Enfield facility has helped make the firm's pay system an integral part of their organizational design by paying on the basis of developing multiple skills. In other words, besides providing the opportunities, tools, and teachers for this development to take place, they actually tailor-made their pay system to foster growth and learning.[7]

6. Advanced technology or computerbased automation alone will not solve the problems with competition, productivity, or economic growth. It is becoming obvious that to realize the full benefits of automation, both workers and technology have to be highly integrated.[8]

New dimensions of the modern organization have been taking shape over the past 25 years. However, the nudge to incorporate these changes comes from the growing awareness of international competition, lower productivity, and sluggish economic growth. Does management know how to use valued resources? The present indications are that management knows:

1 .How to cut costs by laying people off

2. How to eliminate less profitable parts of the organization

3. How to put more work on existing people

4. How to miniaturize existing unused capacity

5. How to purchase profitability through mergers

However, what management doesn't know is:

1 .How to develop less profitable parts of the organization

2. How to redevelop and continue developing employee skills (to achieve their full potential) through training

3. How to redevelop work to use existing people

4. How to revitalize and transform existing facilities for new product lines

5. How to design and incorporate "quality" into products and services

What management knows is how to run an old organization. What management needs to know is how to operate the modern organization. The axiom is that "people today are still what were in the old factory days." Historically, loyalty, commitment, skill, and trust were minimally required from employees. The value and meaning of such attributes were of little significance.[9] But international competition has forced the reality that these very characteristics of the workforce are now critical to the longterm success of the new organization.

The Workforce is Crucial

The traditional explanation for the success of a corporation is thought to be the skill and expertise of the executives and the managers of the firm. However, a brief perusal of international management writings, less embedded in the personal cult of leaders and leadership, indicates that highly skilled, trained, and educated people are what determine quality, lengthened time productivity, and long-term competitiveness.

In the modern environment of services - whether they be health care, product quality in manufacturing, financial, ,information, retailing, service repair, or education - the critical issues of competitive success are determined by the ability and competence of the people who deliver the service or do the work. It is not the "competent" manager who determines the success of a service but the service-giver. The student in a university classroom is not defining the quality of his or her education by the expertise of the dean but rather by the communication of knowledge by the professor. The same may be said of the salesperson, the service agent, the doctor or nurse, the broker, the computer programmer, the information specialist, the distributor, the IBM service specialist, etc. In this environment, these are the people who must be served by the management of the organization. These should be the people who possess knowledge, skills, and competence. They should be the decision-makers in the context of their work and the organization's mission and goals. However, it will happen only in redesigned structures of organization and management. Management must serve its experts who are the people in contact with the market to be served and the product to be made and improved.

We conclude with a most serious question concerning the genre of management literature, both academic and professional. Where can we find a theory of internal management based on service and support? Functionally, management is an authority and power system with each level subordinated to the level above. In a modern environment, that "subordinated" level should contain the expertise and knowledge upon which the position above depends for effective and productive organizational decision-making. However, a nonintegrated structure of power will always find itself isolated from the critical information necessary for progress.

This article is about new structures of organization and new paradigms of management. Namely, it is a return to a serious reflection on Chandler's famous dictum that the structure of the organization (or anything) should be determined by is function.

[1] Hauser, J. R., & Clausing, D., "The House of Quality," Harvard Business Review, 1988, 63-73. [2] Likert, Rensis, The Human Organization, New York, McGraw Hill, 197-211. [3] Lawler, E.E. & Mohrman, S.A., "Quality Circles: After the Honeymoon," Organizational, 1987, 42-54. [4] Drucker, P.F., "The Coming of the New Organization, Harvard Business Review, 1988, 45-53. [5] Proctor, B.H., "A Sociotechnical Work-Design System at Digital Enfield: Utilizing Untapped Resources, National Productivity Review, Summer, 5 (31), 263-270. [6] Rehder, R. R., & M. M. Smith, "Kaisen and the Art of Labor Relations, Personnel, 1986, 83-93. [7] ibid. [8] Ozatalay, S., and Reilly, B., "Is Quality Another Organizational Quick-Fix?" Productivity and Quality Management Frontiers, Institute of Industrial Engineers, 811-820. [9] Business Week, "Management Discovers the Human Side of Automation," 1986, 70-76. [10] Harrison, R., "Harnessing Personal Energy: How Companies Can Inspire Employees," 1987, 5-20.

BERNARD J. REILLY, Ph.D., is a professor of management and health policy at Widener University in Chester, Pennsylvania. He is currently writing books about modern management practices and corporate business ethics.

JOSEPH A. DiANGELO, JR., Ed.D., is dean of the School of Management at Widener University

DENNIS R. LAKER, Ph.D., is an associate professor of management at Widener University.
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Title Annotation:alternatives to conventional decision-making
Author:Reilly, Bernard, J.; DiAngelo, Joseph A. Jr.; Laker, Dennis R.
Publication:Business Forum
Date:Jan 1, 1993
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