The Individualized Corporation: A Fundamentally New Approach to Management

by Ghoshal, Sumantra

• ISBN13: 9780887308314
• ISBN10: 0887308317
• Format: Paperback
• Copyright: 2010-05-24
• Publisher: HarperCollins Publications

Summary

Based on six years of research and hundreds of interviews with managers at every level of companies such as Intel, ABB, Canon, 3M, and McKinsey, The Individualized Corporation explores the collapse of an outmoded corporate form and reveals the emergence of a fundamentally different management philosophy--one that forces on the power of the individual as the driver of value creation in the company and the importance of individuality in management. The image of the "Organization Man" as a cog in a corporate machine has become both dated and dangerous. Rather than try to force employees into a homogeneous corporate mold based on a company's strategy, structure, and system, world-renowned scholars and consultants Sumantra Ghoshal and Christopher Bartlett argue that managers must embrace a philosophy based on purpose, process, and people that focuses on developing and leveraging the individual's unique talents and skills--a company's most important source of competitive advantage. Without proposing a universal solution or a quick-fix prescription, this important book provides an indispensable guide for those who must lead their companies into the next century.

Excerpts

The Rediscovery of Management:

From Organization Man to Individualized Corporation

In 1682, the English astronomer Sir Edmund Halley had the good fortune to be at the right place at the right time. His observations on the spectacular comet that now bears his name helped earn him the prestigious title of Astronomer Royal. More important to this professional scientist was the fact that this fortuitous opportunity inspired a flurry of other research activity that led to new and important discoveries about the nature of our universe.

While hardly on the same grand scale as Sir Edmund, we, too, have been fortunate to have had a front-row seat at a once-in-a-lifetime event-the collapse of an outmoded corporate form and the emergence of a new management model that we believe will propel today's companies well into the twenty-first century. At the heart of the emerging model lie not only some very different organizational practices and processes but also a fundamentally different management philosophy. In this book, we will describe this new management model and illustrate how some of the pioneers of this new approach have implemented it in their own companies.

But in order to fully understand where we are going it is important to recognize and acknowledge where we have been. So before we launch into our voyage of discovery, let us take you on a brief trip through the incredibly short history of the modern corporation-a history whose distinct stages are, rather remarkably, punctuated by the last few visits of Halley's comet.

OF COMETS AND CORPORATIONS

When it blazed past our planet in 1835, the comet heralded the birth of a new corporate form emerging simultaneously in Britain, the United States, France, and Germany. The concept of limited liability led to a proliferation of new corporations eager to meet the demands triggered by the production and transportation booms that had followed in the wake of the Industrial Revolution. In contrast to an earlier generation of specialist traders, producers, wholesalers, and merchants, many of these new companies began to develop as vertically integrated organizations that required a higher order of management skills to coordinate their multifunctional operations.

When Halley's comet returned from its next tour of the solar system seventy-six years later, the well-established functional organization was showing early signs of reaching its limits, and a new corporate model was emerging. Responding to the simultaneous demands of increasing scale (triggered by the new massproduction technologies), and increasing scope (encouraged by diversification opportunities for leveraging existing capabilities into new markets), a few pioneering leaders like Alfred Sloan at General Motors and Pierre Du Pont at Du Pont Corporation began experimenting with the revolutionary multidivisional corporate form. This innovation, in turn, gave birth to an entirely new model of "professional management"-one that has become deeply embedded in practice, spread by consultants, and legitimized in textbooks and business school cases over the past three quarters of a century.

With the era of mass production came the new and powerful philosophy of scientific management espoused by Frederick Winslow Taylor, an engineer and inventor who penned the highly influential Principles of Scientific Management (1911), based on his experience at Midvale Steel and Bethlehem Steel. Built on a belief that any task could be rigorously studied through time-and-motion analysis, broken into discrete activities, and executed by trained specialists, Taylorism not only resulted in a redefinition in the jobs of employees on the factory floor but also caused a revolution in the responsibilities of those who supervised them. Management's critical role became one of motivating and controlling workers in their tightly defined job descriptions, then ensuring effective coordination across these highly specialized activities.

At the same time, the diversification opportunities facilitated by the new multidivisional structure also had a powerful impact on management roles. In an environment in which capital had become the critical strategic resource, planning became a central part of modern management practice. With multiple divisional managers bidding for limited financial resources, companies began to develop sophisticated capital budgeting systems and strategic planning processes to guide the investments. To manage these processes and the related control systems that accompanied them, headquarters groups were expanded to ensure the quality of the information and to analyze it. As staffs' influence grew, so, too, did the policies and procedures that became their primary means of influencing operations.

But the new corporate model reflected more than just a new, complex structural framework and a more disciplined management approach. In this environment of control and coordination and of proliferating plans and policies, a new and different relationship started to develop between companies and their employees. Management's increasing preoccupation with the task of allocating capital and measuring its effective utilization led many to think of the company's employees less as valuable human resources and more as replaceable parts in an efficient production process. The difficulty was that unlike other inputs, people came with widely divergent capabilities and dispositions that made their behavior less predictable. As Henry Ford is reported to have said in exasperation:, "When all I want is a good pair of hands, unfortunately I must take them with a person attached!" Most of the complex new structures and systems overlaid with increasingly sophisticated policies and procedures were designed to minimize individual idiosyncrasies and make people "as predictable and controllable as the capital resources they must manage," as Harold Geneen put it when he was ITT's legendary control-oriented CEO in the 1970s.

This divisionalized structure with its associated professional management approach spread rapidly, fueled by the postwar boom that created market opportunities that exceeded companies' abilities to fund them and fanned by consulting firms such as McKinsey and Company that exported the model and made it as common in Europe as it had become in the United States.

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Excerpted from The Individualized Corporation by Sumantra Ghoshal Copyright © 2003 by Sumantra Ghoshal
Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.