How Future Information-Based Firms Will Cut Fat
What business theorist Peter F. Drucker has called “the information-based organization” is indeed upon us:
- Citicorp has realigned its information systems and organizational structure to enable an account manager to deal with almost any customer’s request.
- A new information system has enabled a telephone company to merge its installation and repair departments, eliminating one-third of its work force while improving customer service.
- Airline ticket agents can sell not only airplane seats but also automobile rentals, hotel rooms and tickets to Disney World.
Fast disappearing is the military-based, hierarchical management structure that passes information and decisions up and down the chain of command. The future corporation will provide one person or a small team of colleagues with all the necessary information to make decisions and take action.
As a result, each person or team will be more responsive to its customers inside and outside the company, and layers of middle managers will disappear.
Drucker has compared the organization of the future to an orchestra in which each musician has clear responsibility. No middle managers check on individual musicians. The proper notes are left to the musicians themselves, under the direction of a conductor, who frequently “manages” more than 75 people. The musicians takes full responsibility for themselves, based on clear instruction from the conductor and the music.
In the modern organization, a customer service representative should bear full responsibility for taking, entering and pricing an order, verifying credit, determining the shipping location and date and confirming delivery.
Most organizations are over-staffed not at the bottom or top but in the middle. Mid-level managers are largely couriers, assemblers and frequently filters of information. They build staffs, often no more than five people, who report to them. Through reports, the manager has access to unique information, which only he or she can add to a decision or transaction.
However, modern information systems can now assemble previously unique information and coordinate it with other previously unique information to allow one person close to the customer or shop floor to make decisions. Layers of staff can thus be reduced or eliminated entirely.
As the information-based organization continues to unfold, one can expect to see staffs reduced along the following lines:
- Companies will attempt to minimize handoffs. Rather than have several people participate in an action, with each person handing a partially completed task to the next, a company will give one person the responsibility of processing the task to completion.
- Information systems and databases will shape organizational structure, not vice versa. Modern approaches recognize that structures change over time, but key information does not. Systems must be structured around information and business processes, not organizational units.
- Companies will seek to design jobs so that managers manage and workers add value. Managers must resist the temptation to create situations where they do the work as well as manage others. They will find little to be gained by taking the most interesting and visible tasks for themselves and leaving their subordinates with the dregs.
- Finally, companies can be counted on to remove management layers that consolidate and merely send on information. This action is inevitable once the preceding steps have been pursued and a modern information system is in place.
As stated earlier, we are beginning to see indications that the “information-based organization” has arrived.
A national conference titled “Information-Based Organizations: From Vision to Reality” will take place March 15-16 in Rancho Mirage. Among the companies scheduled to send speakers to the conference are Sunkist Growers of Van Nuys and Kendall-McGaw, a pharmaceuticals company based in Irvine.
For information on the conference, contact Marie Malangone at Arthur D. Little Inc. (617-864-5770).
