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The End of Bureaucracy and the Rise of the Intelligent Organization.

In their latest book, the Pinchots attempt to confront the key organizational issues threatening today's corporations. They begin by summing up the history of bureaucracy, why that system of government (and business) once worked, and why it is failing. In the process, they define the "intelligent organization" and "intraprise," and talk about the moral climate of success.

During this exploration of how intelligent organizations create conditions for freedom of choice and responsibility for the group, the Pinchots establish a guide in which fairness is as important an element to health and success as efficiency. They argue for fairness and equality in the workplace at all levels, not simply because it is morally "right" but because it works. They say, "Systems thinking teaches that leverage is more easily gained by changing the structure of human systems than by directly controlling events or specific behaviors. Changing the structure does not mean rearranging the organization chart in a new hierarchical pattern run from above. If we want to change a bureaucratic system, we can begin by liberating the self-organizing potential of people working in teams. Then the focus of change will be to provide the conditions in which this freedom leads to the most constructive results."

The Pinchots show how companies reducing bureaucratic control and giving more freedom and choice to individuals and teams are merely following the path already forged by the transformation of nations from feudalism and totalitarianism to systems that have produced greater social equality and material prosperity. Corporations and other large employers are among the last bastions of dictatorship, but people want freedom.

Why then, do they choose dictatorship in the organizations where many spend most of their time? This odd fact caused the Pinchots to explore bureaucratic companies, define their successes and mistakes, and attempt to invent new systems that will work in today's intelligence-intensive global economy. They state, ". . . members of what we call an intelligent organization will have the right to create their own jobs if they can find other units willing to pay for their services. They will band together to form what we call 'intraprises,' by which we mean enterprises within a larger organization. These . . . live or die not by the decisions of the chain of command, but by their ability to find customers who need their services either inside or outside the organization." They concluded that the intraprises that would "collectively make the biggest difference . . . were not those focused on new ventures, but rather those focused on providing services to the existing business units more innovatively and at lower cost."

Gifford and Elizabeth Pinchot have started and run four companies together, worked with more than half of the Fortune 100, led school and community reform projects and collaborated on their earlier book, Intrapreneuring, which described a framework for freedom and innovation in the workplace. They used these experiences to good advantage here where they describe a system of internal free markets bringing many of the benefits of the external free-enterprise system to the relationship between the parts of an organization.

In their search for models of more open workplaces for the future, they looked to many types of small organizations--from high tech firms of California's Silicon Valley and manufacturing businesses around the country to the Grameen Bank of Bangladesh. They support the changes they propose with examples from varied business environments (including discussions of the dangers associated with this kind of change) from the start of a process to its finish, also reporting the results.

These examples make the book worth reading. Corporate America is bombarded lately with sermons about the evils of bureaucracy and the danger of a rigid institutional hierarchy; however, few of these soothsayers give us documented examples of success, usable recipes for experiments, or offer proven solutions to problems. The Pinchots do give solutions to ending bureaucracy, creating freedom of choice, and ensuring responsibility for the group even while they acknowledge possible dangers or side-effects. There are sections on corporate financial systems for free enterprise, outsourcing and insourcing, and developing community, equality, and diversity in the workplace.

For example, in Chapter 9, "Outsourcing and Insourcing," they discuss Professor James Brian Quinn's recommendations for outsourcing the bulk of activities currently performed that do not contribute to the company's core competence. He advises companies to examine everything that they do, ask if they perform those services better than anybody else in the world, and outsource anything that does not fall into that category. Then the Pinchots recount the history of IBM's association with Intel and Microsoft--the results were spectacular, but without a reliable proprietary advantage, IBM now struggles with clone makers, while Intel and Microsoft are in an enviable position.

In the end the Pinchots say, "Though we believe outsourcing can be extremely valuable, we are concerned that part of the drive toward outsourcing comes from the low levels of efficiency, service, and innovation provided by internal functions and staff groups in bureaucracies. There is a risk that too much outsourcing can weaken the long-range core competencies of an organization. Often we need to find a way to do things effectively inside, not just give up doing them." The appendices of this book provide a "Free Intraprise Manifesto" actually prepared while organizing their thoughts for this book, and a "Bill of Rights and Responsibilities of the Intelligent Organization." The notes and index are thorough and useful. Together with the "real time" examples and historical discussions, they become useful tools for people at all levels of an organization.

Reviewed by Katherine R. Jeschke, managing editor, Business Credit. (The End of Bureaucracy & the Rise of the Intelligent Organization Berrett-Koehler Publishers, San Francisco, Calif., 300 pp., $24.95).
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Author:Jeschke, Katherine R.
Publication:Business Credit
Article Type:Book Review
Date:Jul 1, 1994
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