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SURVEY The Company - University of Wisconsin-La Crosse

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SURVEY The Company - University of Wisconsin-La Crosse

SURVEY: The Company

    The new organization Jan 19th 2006 From The Economist print edition

    The way people work has changed dramatically, but the way their companies are organised lags far behind, says Tim Hindle

    FIFTY years ago William Whyte, an editor at Fortune magazine, wrote a book called “The Organisation Man” that defined the nature of corporate life for a generation. The book described how America (whose people, he

    said, had “led in the public worship of individualism”) had recently turned into a nation of employees who “take

    the vows of organisation life” and who had become “the dominant members of our society”.

    Foremost among the organisations that Whyte had in mind was the corporation, which he thought rewarded long service, obedience and loyalty quite as faithfully as did any monastery or battalion. ―Blood brother to the business trainee off to join DuPont is the seminary student who will end up in the church hierarchy,‖ he wrote. The New York Times praised Whyte for recognising that ―the entrepreneurial

    scramble to success has been largely replaced by the organisational crawl.‖

    Half a century on, organisation man seems almost extinct, though occasionally he can still be spotted in Hollywood. In ―The Hours‖, a 2002 Oscar-winning film, the actor John Reilly plays a character who lives in a 1950s Los Angeles suburban bungalow, just as Whyte's organisation man lived in ―the new suburbia, the packaged villages that have become the dormitory of the new generation of organisation men‖. Mr Reilly is waved off to work every morning by his young son and his faithful wife, played by Julianne Moore. His shirt is white and his suit and tie are dark, broken only by the line of a white handkerchief in his breast pocket. He spends all day in an office with the same small group of people and returns home each evening at the same time. ―This is perfect,‖ he says of his life over dinner one evening.

    The company that used to be most closely identified with this way of life was IBM. For many years its managers wore only dark blue suits, white shirts and dark ties, symbols of their lifetime allegiance to Big Blue. It is some measure of the change that has taken place since Whyte's day that today 50% of IBM's employees have worked for the company for under five years; 40% of its 320,000 employees are ―mobile‖, meaning that they do not report daily to an IBM site; and about 30% are women. An organisation that was once dominated by lifetime employees selling computer products has been transformed into a conglomeration of transient suppliers of services. Organisation man has been replaced by a set of managers much more given to entrepreneurial scramble than to organisational crawl.

    This transformation has been brought about by a variety of changes in the environment in which businesses operate, particularly in communications technology, in the globalisation of production and sales, and in the large-scale shift of responsibility to outsiders for what were once considered a company's core

    functionsvia outsourcing, joint-ventures and other sorts of alliances that involve a loosening of control over vital inputs.

    Whyte, who died in 1999, would have enjoyed witnessing organisation man's metamorphosis into ―networked person‖, a species that can now be observed in airport lounges, on fast inter-city trains and at

    motorway service stations. Networked person is always on the move, juggling with a laptop computer, a mobile phone and a BlackBerry for e-mails, keeping in electronic touch with people he (and increasingly she) no longer regularly bumps into in a corridor. Indeed, there may be no corridor. These days, many employees besides IBMers no longer have a physical home base in a building provided by their employer.

    Organisation man did bump into people in corridors, but he was cautious about networking. In his world, knowledge was power, and he needed to be careful about sharing out his particular store of it. He found comfort in hierarchy, which obviated the need to be self-motivating and take risks. He lived in a highly structured world where lines of authority were clearly drawn on charts, decisions were made on high, and knowledge resided in manuals.

    Networked person, by contrast, takes decisions all the time, guided by the knowledge base she has access to, the corporate culture she has embraced, and the colleagues with whom she is constantly communicating. She interacts with a far greater number of people than her father did. A famous 1967 study by Stanley Milgram (which later became the basis for a film) suggested that there were at most ―six degrees of separation‖ between any two people in America, meaning that the chain of acquaintances between them never had more than six links. According to more recent work along similar lines, that number has now fallen to 4.6, despite the growth in America's population since Milgram's study. Being able to keep in touch with a much wider range of people through technologies such as e-mail has brought everyone closer.

    And yet despite the dramatic changes in the way people work, the organisations in which they carry out that work have changed much less than might be expected. In an article in the McKinsey Quarterly last

    year, Lowell Bryan and Claudia Joyce, two of the firm's consultants, argued that ―today's big companies do very little to enhance the productivity of their professionals. In fact, their vertically oriented organisational structures, retrofitted with ad hoc and matrix overlays, nearly always make professional work more complex and inefficient.‖ In other words, 21st-century organisations are not fit for 21st-century workers.

    Mercer Delta, a consulting firm that specialises in ―organisational architecture‖, recently observed that ―the models and frameworks that shaped our leading organisations from the end of the second world war through the conclusion of the cold war are clearly obsolete in this new era of e-business, perpetual innovation and global competition.‖ The design of today's complex enterprises, says Mercer Delta, requires

    an entirely new way of thinking about organisations.

    The classic structure in which organisation man felt comfortable consisted of a number of business units that operated similarly but separately. They were controlled by a head office that determined strategy and watched over its implementation. It was a system of command and control in which everybody knew his place, made visible in the organisation charts that laid down the corporate hierarchy. A surprising number of companies today still have much the same command-and-control structure that they had 50 years ago. According to the Boston Consulting Group, what it calls ―the imperialist corporate centre‖ is still the most common type of headquarters. And companies that do decentralise decision-

    making and accountability often recentralise it again when they run into trouble.

    Twenty years ago, Motorola, a co-inventor of the mobile phone, was a tightly centralised business. Three men in its headquarters at Schaumburg, Illinois (including Bob Galvin, the founder's son), were in control of almost everything that went on. As the company grew, they decided to decentralise. But by the mid-1990s the company's mobile-phone business was growing so fast that decentralisation made it impossible to control. ―While the numbers are getting better, an organisation can be falling apart,‖ says Pat Canavan, Motorola's chief governance officer. In 1998 the company laid off 25,000 people and repatriated control to the Schaumburg headquarters.

     The trouble with silos

    The main failing of the classic structure was that it impeded the

    spread of knowledge and limited the economies of scale that could

    be reaped. Ideas and commands moved up and down from

    headquarters to the units, leading to the creation of vertical ―silos‖

    with very little communication between them. Financial-service

    institutions were notorious for not knowing whether customers who

    signed up for one service were already customers for other services

    being provided by the same institution.

    As firms became more global, they added what McKinsey called a

    ―matrix overlay‖ to this structure. Most famously associated with

    Philips, a Dutch electrical and electronics giant, this attempted to

    take more account of the different national markets in which a

    company was operating by superimposing geographical silos that cut across the traditional business units.

    Such organisations have not commanded universal admiration. In 1990, in a paper published by the Harvard Business Review, Sumantra Ghoshal and Christopher Bartlett, two academics, reported that matrix structures ―led to conflict and confusion; the proliferation of channels created informational logjams

    as a proliferation of committees and reports bogged down the organisation; and overlapping responsibilities produced turf battles and a loss of accountability.‖ Nigel Nicholson, a professor of organisational behaviour at the London Business School, called the matrix structure ―one of the most difficult and least successful organisational forms.‖

    Messrs Ghoshal and Bartlett wrote in the past tense, suggesting that companies had escaped from the matrix corset. But 15 years after the article was published, many are still trying to struggle free.

    Gerard Fairtlough, a former CEO of Shell Chemicals and the founder of Celltech, a British biotechnology company, also suggests that companies are still being held back by their addiction to hierarchy. In a recent book, ―The Three Ways of Getting Things Done‖, he points to alternatives to the hierarchical structure that many companies see as their only option.

    ―You can't have a bunch of hippies running a plant full of explosive hydrocarbons,‖ he says. ―But would you rather have the plant operated by trained professionals, for whom pride in safe working is part of their personal identity, or by people who only work safely because they are afraid of the boss? The identification of discipline with hierarchy is a dangerous mistake.‖ Mr Fairtlough's preferred alternative is something he calls ―responsible autonomy‖, a form of organisation in which groups of workers decide for themselves what to do, but are accountable for the outcome.

    Clearly there is a need for new kinds of organisation that are more appropriate to modern working methods. But there are many reasons why companies are not in a hurry to adopt them.

    The matrix master Jan 19th 2006 From The Economist print edition

Philips redraws the lines

PHILIPS, a Dutch electrical giant, was one of the earliest champions of the matrix structure. After the second

    world war it set up both national organisations and product divisions. The boss of the washing-machine division

    in Italy, say, would report to the head of Philips in Italy as well as to the washing-machine supremo in the

    Netherlands. This network was loosely held together by a number of co-ordinating committees designed to resolve conflicts between the two lines of command.

    By the 1990s Philips had decided that this structure was no longer working well. There had been more or less continual problems over accountability. Who was to be held responsible for the profit-and-loss accountthe country boss or the product head? For a while, the country heads had had the upper hand, but the product bosses had fought back. A reorganisation in the early 1990s created a number of units with worldwide responsibility for groups of the company's businessesconsumer electronics, medical

    products and so on. The national offices became subservient to these new units, built around products and based at the firm's headquarters.

    Gently does it

    In the past three years the company has been gently drawing back from this structure without attempting a radical reorganisation. For instance, it has appointed a chief marketing officer to help counter the criticism that it has been paying too much attention to technology and new products and not enough to its customers.

    Gerard Ruizendaal, head of corporate strategy at Philips, says the company has learnt that whenever it creates a new organisation, it creates a new problem. So, under the slogan ―One Philips‖, it has introduced a number of low-key changes, such as encouraging employees to work across different business units. In November, it handed out awards for three business initiatives in which people had created value for the company by collaborating with others outside their immediate units.

    Philips is also making it clear that employees are expected to move around in their careers rather than stick with a single geographical region or product area. Mr Ruizendaal says that 70-80% of the changes required will come about by shifting managers' attitudes; the rest from putting in place incentives, not all of them monetary. To help change minds, Philips last year brought together its top 1,000 managers for a series of workshops expressly designed to talk about issues that cut across organisational boundaries.

    Take a deep breath Jan 19th 2006 From The Economist print edition

The best time to embrace radical change is when you are down

ONE reason why so many companies stuck to their old organisational structures for so long is that they still

    seemed to be working. General Electric under Jack Welch was one example. Emerson, an electric and electronics business based in St Louis, was another.

    Emerson's story was recounted last year in ―Performance without Compromise‖, a book written by Charles ―Chuck‖ Knight, the man who led the company through most of an unbroken run of continually rising

    earnings per share between 1957 and 2000. At first sight, Emerson looks like a company in which organisation man would feel at home. ―Planning and control are central to the way Emerson works,‖ according to Mr Knight. More than half his time was taken up with planning, much of it spent in long, confrontational meetings with the company's division heads, where budgets and projections were torn apart and redrawn. This compelled the company to maintain a relatively large number of staff at its headquarters in St Louis.

    Emerson's employees are loyal. The average length of service of its top 15 managers is a hefty 26 years, and promotion tends to be from within. Communication, says Mr Knight, is kept to a minimum: ―Our planning and control cycle provides ample opportunity to communicate the most important business issues...we don't burden our system with non-essential communications and information.‖

    The company's success was, on Mr Knight's own admission, the fruit of a long, hard slog. A little light relief was provided by an annual golf tournament for top executives and important customers—―a great

    way for our people to bond with each other,‖ according to Mr Knight. Not surprisingly, the Emerson story features very few women. All in all, the company sounds like the sort of command-and-control organisation that has outlived its effectiveness.

    Yet Emerson continues to be successful. Its secret seems to be that, notwithstanding the title of Mr Knight's book, it has in fact been prepared to compromise. In the 1990s, for example, the company set up account teams to deal with big customers who bought from several of its divisions. The teams cut across the company's long-standing organisational boundaries. The purpose, says Mr Knight, ―was to allow the customer to see Emerson as a single integrated supplier rather than a collection of independent divisions.‖

    The company has also set up a design-engineering centre in India, invested heavily in China and hired some of the most progressive advisers on strategy and leadership development. Its current CEO, David Farr, spends more time with customers than did his predecessor. In short, Emerson, despite first impressions to the contrary, has changed quite a lot over the years. As Mr Knight puts it: ―We succeeded in combining impressive consistency and fundamental change‖ (his emphasis).

    The uses of adversity

    By and large, though, successful companies find it a lot harder to restructure than those that have less to lose. Organisations are strongly inclined to carry on with ―the way things are done around here‖ unless they have compelling reasons to stop. It is little wonder, therefore, that many of the recent pioneers of new organisational structures were in deep distress when they introduced them.

    One example is BP, an international oil giant that was close to bankruptcy in 1992 when Lord (John) Browne, then head of the company's oil-exploration division (known as BPX), set out to restructure his fief. The choice was stark: radical change or extermination. In the best recent book on new corporate architecture, ―The Modern Firm‖, John Roberts, an economist at Stanford, describes the reorganisation at BPX as ―disaggregation‖.

    Its key elements, he says, ―involve redrawing the horizontal and vertical boundaries of the firm to increase strategic focus; creating relatively small sub-units within the organisation in which significant decision-rights are lodged; and decreasing the number of layers of management and the extent of central staff.‖

    Accountability and responsibility for performance at BPX were pushed down to the level of the company's individual oil fields. Previously performance measures had been aggregated by geographic region, leaving managers further down the line with little idea of how well they were doing, and little incentive to do better. When early experiments with disaggregation showed that it increased output and brought down costs, it was introduced across BPX, and then across the whole of BP after Lord Browne became CEO of the whole company in 1995.

    The oil giant had traditionally had a highly centralised hierarchical structure, but Lord Browne cut its head-office staff by some 80% and pushed decision-making down to 90 newly established separate business units. The hierarchy was flattened so much that the head of each of the 90 units reported directly to the company's nine-man executive committeethough as BP subsequently grew through takeover, some

    intermediate layers were introduced again. Individual managers also had much of their head-office support removed. The top of their silo had suddenly been lopped off.

    To discourage the silo mentality further, horizontal links were set up between the units. BPX's assets were split into four groups, roughly reflecting the stage they had reached in their economic life. Members of each group thus faced similar commercial and technical issues, and were encouraged to support others in their group and help solve each other's problems.

    Mr Roberts says that these changes in ―the architecture and routines eventually led to fundamental cultural changes. BP's people developed a deep, intrinsic dedication to delivering ever-improving performance. Strong norms emerged of mutual trust, of admitting early when one faced difficulties and seeking assistance when needed, of responding positively to requests for help, of keeping promises about performance.‖

    As part of the reorganisation, some assets were sold off and BP's total staff was cut from 97,000 in 1992 to just over 50,000 three years later. Over the past decade the company's stock has performed exceptionally well.

    Like BP, Philips was in deep financial trouble when at last it began to take down its long-standing matrix structure in 1991 (see article matrix master). And IBM in 1992 recorded the biggest loss to date in corporate history, which prepared the ground for Lou Gerstner to give Big Blue a new strategyto

    concentrate on servicesand a new structure to go with it. Likewise, Nokia in 1992 was a hotch-potch conglomerate, with products ranging from rubber boots to television sets, and going nowhere. It switched its strategy to specialise in telecommunications and built a new structure to go with it. Today Nokia and BP are two of Europe's most valuable companies, and IBM is once again one of the world's most admired companies.

    ―Organisational innovations, when properly applied, do lead to better economic performance, affecting the

    material well-being of the people of the world,‖ says Mr Roberts. ―Moreover, they alter the ways work is done, changing people's lives.‖ Structure matters. Much of the large increase in the ratio of firms'

    stockmarket value to their book value since the early 1990s is due to the market's growing awareness of the role of human and organisational capital in the creation of value. For companies such as Wal-Mart and Dell, their structure is their main source of competitive advantage. For companies currently in difficulty,

    such as General Motors and the big American airlines, structural reorganisation will be a necessary part of any recovery.

    The tortoise and the hare Jan 19th 2006 From The Economist print edition

The search for innovation WHY would a healthy and successful company want to subject itself to a long and painful process of restructuring? In telling

    Emerson's story, Mr Knight hints at an answer. In the early 1990s,

    the company decided to separate its ―planning for profit‖ from its

    ―planning for growth‖. Previously its management's efforts had

    been concentrated mainly on paring costs and improving margins.

    But Emerson realised that it was time to ―emphasise new products,

    new markets and new customers‖.

    Many companies today are in the same position. They are

    emerging from a long period when their main concern was to cut

    costs and improve their balance sheets after the dotcom bust.

    Squeezing costs has dramatically improved profits: in each of the

    last three quarters of 2005, earnings per share of companies in

    the S&P 500 index were around 20% up on the same period in

    the previous year.

    Now firms are trying to expand and find new customers. They are

    beginning to pay less attention to their bottom-line profits and

    more to their top-line revenues. A recent survey by the

    Conference Board, an association of American businesspeople,

    puts ―sustained and steady top-line growth‖ at the top of the list

    of American CEOs' concerns.

     The fun of the new

    Pushing up revenues is more fun than cutting costs. It involves doing or buying new things, and the temptation is always to do this too soon and too enthusiastically. A.T. Kearney, a consulting firm, argues that growth of revenue and of profits are interrelated. In studying the performance of a group of big global banks between 1996 and 2003, it found that very few of them were able to increase shareholder value by more than 15% per annum without increasing their top-line revenues to match. A recent study by McKinsey came up with a similar finding: that a company ―whose revenue increased more slowly than GDP did was five times more likely to succumb, usually through acquisition, than a company that expanded more rapidly.‖ The choice for corporate bosses seems to be: grow or be gobbled.

    In essence, there are two ways of achieving top-line growth: companies can buy it through mergers or acquisitions, or they can generate it internally. To do the second, they need to innovate.

    In an American magazine-editors' poll last year to find the 40 best covers of the past 40 years, the single example from The Economist, dating from 1994, was headed ―The trouble with mergers‖ and featured two

    camels coupling awkwardly. The article that went with it explained why most mergers go wrong. But mergers have become no more extinct than camels. Last year was a bumper one for cross-border acquisitions in Europe, and in America the value of telecoms deals alone was over $100 billion. Nevertheless, it remains extremely difficult to make mergers work.

    There is some evidence to suggest that companies are becoming better at it. Some of them have set up special mergers-and-acquisitions units, manned by experts in the skill of post-merger integration. Motorola has introduced a systematic review of every acquisition three years after the event to see what lessons can be learnt.

    What may also have helped is that with money relatively cheap, more deals today are being financed with cash than with the buyer's stocks and shares (the method favoured during the stockmarket bubble at the beginning of this decade). This tends to concentrate buyers' minds more sharply on the value of their acquisition.

    Go organic

    Yet there is a limit to the amount of top-line growth that can be bought. A recent report from A.T. Kearney says that ―in some industries, significant growth is still possible through acquisitions. But the unavoidable reality is that long-term advantage also requires skills at creating organic growth.‖ This need to create internal growth is driving companies to search for ways of making their people more creative and more productive.

    The problem is particularly pressing for the big oil companies. Unless they merge with one of their own number, which may well be ruled out by antitrust considerations, no acquisition can make more than a marginal difference to their top line. Some other industries, such as food retailing in Britain, face the same dilemma. For Tesco, as for BP, the only real option for growth is organic.

    At the heart of organic growth lies innovation: new ideas to develop new products and new markets. In the past, innovation took place mostly in the R&D department. In a paper written in 2001, Baruch Lev, a professor of accounting and finance at New York University, wrote: ―Much of the research in the field of intangibles deals with R&D, which is just onealbeit importantform of intangibles. The reason for the

    R&D focus of researchers is simple: R&D is the only intangible asset that is reported separately in corporate financial statements.‖

    In fact, the men in white coats have not been doing very well with their new pills and gadgets in recent years. A study in 2005 by consultants at Booz Allen Hamilton, the most comprehensive effort to date to assess the influence of R&D on corporate performance, concluded that ―there is no relationship between R&D spending and the primary measures of economic or corporate success.‖ What matters is not how

    many R&D dollars you spend, say the authors, but how you spend them.

    Most of the innovation in pharmaceuticals these days is coming from small new firms. Big Pharma's R&D activity is now concentrated as much on identifying and doing deals with small, innovative firms as it is on trying to discover its own blockbuster drugs.

    Traditionally, innovation has taken place either in the laboratory or in the marketing department. The laboratory may have proved sterile in recent years, but the marketing department has been a hive of creative activity, with endless new products and product extensions pouring out. The iPod digital music player, for instance, was quickly followed by the even smaller iPod nano; the Kit Kat chunky chocolate bar by the caramel Kit Kat chunky bar.

    Yet there is a limit to this process too. In an article last year in the Journal of Economics and Management

    Strategy, Dipak Jain, dean of the Kellogg business school, and Michaela Draganska, an academic at Stanford, claimed that too many product extensions can have an adverse effect on overall market share and push up costs. Producers as well as consumers, it seems, can have too much of a good thing.

    Look high and low

    Where else, then, can companies turn for innovation? Many of them are now formally looking outside their own organisations. Joint-ventures and in-house venture-capital funds enable them to take a stake in potentially interesting ideas without the full risk of developing them. Motorola has four main outside sources from which it hopes to draw new ideas: universities, where it funds research in areas of interest to it; government bodies, to which it applies for research grants; small and medium-sized enterprises, from which it licenses or buys new ideas; and its own in-house venture-capital fund, some of whose investments may come up trumps.

    Sometimes innovation can take unusual forms. Adrian Slywotzky, a consultant at Mercer and author of a book entitled ―How to Grow When Markets Don't‖, tells the story of Air Liquide, a French manufacturer of

    industrial gases that has been innovative in an unconventional way and has grown dramatically as a consequence. The company found itself in a mature business where it had little hope of coming up with new products. So it turned itself from a simple maker of gas into a provider of energy services to its customers (mainly large corporations), and managed to persuade many of them to outsource all their energy needs to it. For several years thereafter, Air Liquide managed to chalk up double-digit growth in both revenues and profits.

    The story is reminiscent of that of IBM, which switched from being a provider of hardware to being a supplier of services to users of similar hardware. It built a new business by supplying its existing customers with something different in which it could reasonably claim expertise. Between 1994 and 2003, IBM notched up mainly organic annual growth of 15-20% in revenue from services. Over the same period, the proportion of the company's total revenues that came from services rose from 25% to almost 50%.

    All this goes to show that innovation can be a quite a simple thing. It does not reside only in the minds of brilliant but nutty scientists, or of creative luvvies in marketing departments and advertising agencies. It can blossom almost anywhere in an organisation that is properly structured to encourage it.

    Thinking for a living Jan 19th 2006 From The Economist print edition

Knowledge workers need a new kind of organisation

CENTRAL to much thinking about how organisations should be restructured for the 21st century is the idea that

    innovation and growth will depend more and more on so-called knowledge workers, the sort of people who, to

    quote the title of a recent book by Thomas Davenport of Babson College, Massachusetts, find themselves “Thinking for a Living”.

    Lowell Bryan and Claudia Joyce at McKinsey reckon that knowledge workers (whom they prefer to call ―professionals‖) ―represent a large and growing percentage of the employees of the world's biggest corporations‖. In some industries, such as financial services, media and pharmaceuticals, they think the share may already be as high as 25%.

    Others would put it much higher. One of the secrets of Toyota's success, says Takis Athanasopoulos, the chief executive of the Japanese carmaker's European operations, is that the company encourages every worker, no matter how far down the production line, to consider himself a knowledge worker and to think creatively about improving his particular corner of the organisation (of which more later).

    In one sense, the organisation in which every member is a knowledge worker already exists: it is the professional-service firm, the organisational structure favoured by lawyers, accountants and consultants. Most such firms are organised as partnerships or quasi-partnerships, where strategic decisions are made democratically at regular get-togethers of the partners.

    That is not a practical way to run a multinational company with hundreds of thousands of employees in dozens of countries. But in small ways, technology is already helping big firms to treat their employees more like partners. IBM recently held a 72-hour online chat session (which it called a ―jam‖) among

    employees from 75 different countries to discuss the company's values, and plans to hold more. ―Jams

    enable a kind of mass collaboration and problem-solving that has simply never before been possible on a global scale,‖ says Irving Wladawsky-Berger, the company's vice-president of technical strategy and

    innovation.

    McKinsey's Mr Bryan soberly points out that we are not all knowledge workers yet. ―Fifty per cent of workers are still modern versions of old-style factory workers,‖ he says. They still live off their brawn rather than their brain, and they may be able to live happily with organisational structures that are, as Mr Bryan puts it, ―retrofitted with ad hoc and matrix overlays‖, and that are ill-suited for knowledge workers.

    Today's complex firm may need a new matrix, with one structure for its knowledge workers and another for its more traditional workforce.

    However defined, the knowledge worker is not exactly a new invention. In one of his more prescient moments, Peter Drucker, the great management thinker who died last November, wrote: ―To make knowledge-work productive will be the great management task of this century, just as to make manual work productive was the great management task of the last century.‖ The date was 1969, and by ―this century‖ he meant the 20th.

    Taylor-made

    The task he referred to had been begun by Frederick Winslow Taylor, an American Quaker who had devised what he called ―a piece-rate system‖ while working for the Bethlehem Iron Company in the late 19th century. Drucker said that Taylor was the first man who ―did not take work for granted, but looked at

    it and studied it.‖ Through his study, he ―sparked the revolution that allowed industrial workers to earn middle-class wages and achieve middle-class status despite their lack of skill and education‖.

    Drucker was calling for another revolution, one that would make knowledge workers more productive, but he was still waiting for it when he died. Mr Davenport puts his finger on one of the key problems: measuring the output of knowledge workers. How, for instance, do you measure the value of a string of ideas coming out of a marketing department?

    If knowledge worker A works for ten hours and knowledge worker B for eight hours, most people will assume that B has the easier job, not that he is more efficient at it. ―Alas,‖ writes Mr Davenport, ―there is no Frederick Taylor equivalent for knowledge work. As a result we lack measures, methods and rules of thumb for improvement. Exactly how to improve knowledge-work productivity...is one of the most important economic issues of our time.‖

    One way, he suggests, might be to examine how different workers use knowledge; to see which technologies best gather and disseminate the information that knowledge workers need; and to find the workspace that is best suited to people who are highly mobile and need to concentrate a lot.

    The sort of technologies he has in mind are the sophisticated online directories that companies have developed to help employees identify expertise and knowledge held by others within the organisation. Examples include Hewlett-Packard's Connex, Motorola's Compass and IBM's Blue Pages Plus. To some

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