Business Finds That Small Is Beautiful



A revolution is sweeping through the business world that some believe could turn out to be as far-reaching as the Industrial Revolution.

''There's no end to it,'' notes one executive. ''I don't know what the hell the business world is going to look like by the end of this century.''

Called the ''organizational revolution,'' it takes various forms: restructuring, downsizing, rightsizing, flattening. When it surfaces in the media it takes the form of massive layoffs -- restructuring almost always means getting smaller.

The particular origins of this revolution lie in a spreading )R conviction among executives and management theorists that American business has to change drastically to survive in a new global economic environment.

''In outfits as diverse as Eastman Kodak, Hall- mark Cards and General Electric,'' reports Fortune magazine, ''the search for the organization perfectly designed for the 21st century is going ahead with the urgency of a scavenger hunt.''

Already within corporations hierarchical forms are being flattened and rigid departments loosened up. In their place, temporary teams of executives cross departmental lines to grapple creatively with specific problems.

Workers on shop floors engage in intense ''self-managing'' activity, making decisions about changes and evaluating the quality of their operation. Corporate empires are being broken up into loosely-linked ''networks'' of semi-autonomous companies. More and more company work is being farmed out to consultants, subcontractors and temporary employees.

Peter Drucker, the dean of American management theorists, believes this amounts to a restructuring of the whole economy: ''From being organized around the flow of things and the flow of money,'' he says, ''it is becoming organized around the flow of information.''

Global competition ranks high among the causes of this rush to find new forms of organization. For decades, American corporations competed only with one another for domestic and foreign markets. They built huge corporate bureaucracies -- such as General Motors -- and formed strong management habits based on the belief that their way of doing things was the best.

Those days are over. ''Every American business is now potentially subject to the threat of foreign competition,'' says Secretary of Labor Robert Reich.

Technological change is another major factor. Computerization transforms the flow of information within companies, and often has the effect of rendering middle managers obsolete. Three million middle management jobs were eliminated in the past decade.

Traditional blue-collar workers are also disappearing, replaced by a new breed of ''knowledge workers'' who require different management techniques. One team of theorists says flatly: ''It is not possible to supervise knowledge workers. They do not work on assembly lines and they cannot be managed as if they did.''

As consumers become ever more informed and selective, companies are finding they can no longer rely on brand loyalty.

Management guru Tom Peters declares, ''All goods and services are becoming fashion goods,'' subject to rapid changes in the marketplace. He now uses words like ''ephemeral'' and ''fickle'' to describe consumer behavior -- and warns businesses that today's hot fashion item may be tomorrow's has-been.

William Davidow, a California business consultant, sees increasing involvement of consumers in the production of goods and services.

He talks about the ''virtual corporation,'' a new kind of producer that will give the customer goods and services to order, on the spot. In the future, even high-price items such as cars will, he predicts, be manufactured according to customer specifications.

The virtual corporation, Mr. Davidow says, will look ''almost edgeless'' to the outside observer, with continually changing interfaces between company, supplier and customers.

''From inside the firm, the view will be no less amorphous, with traditional offices, departments and operating divisions constantly reforming according to need.''

This kind of prediction points to one of the most striking things about the organizational revolution -- which is that it may only have just begun. All the forces that launched it -- the globalization of trade, technological change, shifts in consumer behavior -- are still roaring along.

''This is the hard thing for executives to get,'' says one businessman. ''It's not too hard to accept that you have to change. But people want to restructure a company or a division and think they've done the job.

''It doesn't work. You have to restructure, and then figure out if you've changed too little or too much, or in the wrong direction, and then learn from the change, and then restructure again. It's endless.''

Walter Truett Anderson is a political scientist whose most recent book is ''Reality Isn't What It Used To Be.'' He wrote this commentary for Pacific News Service.

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