HOW COMPANIES ENCOURAGE ENTREPRENEURSHIP
ARCO To spur the growth of its solar business, the Los Angeles-based
oil company spun it off as a company in its own right last year and instructed it to “think like a smaller company” instead of a big Atlantic Richfield division. It has to adhere to its parent’s ethics standards but is free to set its own salary and employee benefits structure, dress code, style and staffing standards. It isn’t required to buy its insurance and other services from Arco and is judged against the financial standards of companies its own size.
BANKERS TRUST In 1977, it eliminated consumer banking, focused on wholesale
and investment banking, and tried to emulate Wall Street’s hard-charging professionals. The New York bank reorganized into 25 profit centers, eliminated layers of bureaucracy, demanded more creativity and productivity, and linked bonuses to merit and business-unit profitability instead of seniority. Top performers now get Wall Street-sized salaries and six-figure bonuses.
BAXTER TRAVENOL A tradition of innovation had suffered amid rapid growth, centralized
management, bureaucracy and less investment in new ideas and products. So the Chicago-area health-care company elevated a cadre of young go-getters to top positions in 1982, encouraged employees with good but slightly offbeat ideas and a desire to nurture them from development to market, and separated product designers from their marketing masters in order to inspire more long-range, visionary thinking rather than just turning out products that are immediately saleable.
GOULD When in 1980 earnings fell for the first time in 10 years and managers
fled in droves, Gould Chairman William T. Ylvisaker dismantled the company that he had pieced together with about 50 acquisitions, turned the manufacturing conglomerate toward electronics, and suspended his own authoritative and by-the-numbers style. The Chicago-area firm reorganized into four autonomous groups, management layers were excised, corporate staff was cut by 40%, and employees received incentives of up to twice their salaries to take more risks.
KOLLMORGEN In 1970, the predecessor to Kollmorgen couldn’t meet delivery schedules
for printed circuit boards, quality was suffering, profits were erratic, and turf wars flared up continually. One “solution,” a computerization program, simply kept foremen preoccupied with printouts and internal systems instead of people. So the Stamford, Conn., firm reorganized into small groups that could make decisions quickly. Each was responsible for its own profits, dealt directly with customers and set its own prices. Within six months, output per employee doubled and the on-time delivery rate rose to 90% from 60%.
NCR National Cash Register had a history of playing catch-up to its smaller
competitors; it was notably late in shifting to electronic cash registers. In 1979, consultants said its organizational structure slowed product development. So the Dayton, Ohio, firm--now known as NCR--scrapped centralized procedures for product development and decentralized management into independent business units. Each unit has responsibility for its own ideas, products, prices and sales. To simulate the free market, no unit is required to buy its components from other NCR operations. Nor are NCR marketers bound to buy the units’ products.
