It’s hard to imagine what our industrial society would be like if, for instance, there were no factories. How would things get produced, how would business survive? But are we, in fact, an industrial society? Are factories going to be the prime production place for a society that is conserving energy and doesn’t need to travel to work because the silicon chip makes it more efficient to work at home? Who knows what the impact of energy conservation and women in the work force will be on future organizations? One thing we can be sure of, this author writes, is that whatever tomorrow brings, today’s assumptions probably cannot account for it. We are, he asserts, entering a period of discontinuous change where the assumptions we have been working with as a society and in organizations are no longer necessarily true. He discusses three assumptions he sees fading—what causes efficiency, what work is, and what value organizational hierarchy has—and then gives some clues as to what our new assumptions might be. Regardless of what our assumptions actually are, however, our organizations and society will require leaders willing to take enormous risks and try unproved ways to cope with them.
Everybody loves a bit of a puzzle. When, in Through the Looking Glass, Alice continually comes up against some logical dilemma, the reader generally delights in the semantic confusion. Ordinarily, we don’t encounter such puzzles. But what if we did? Then the confusion might not be so much fun.
In a sense, modern society—as well as its organizations—has found itself going through the looking glass. If, as the late Dr. E. F. Schumacher believed, many cause and effect relationships hold good for a while but not forever, then the logical order of things can change.1 In Alice’s terms, maybe there could be a time with no jam forever, or sentences could come before verdicts.
Nonevolutionary change in the way things work is a discontinuity, and I firmly believe that much of the anxiety of modern society stems from an increasing sense of discontinuity, of inevitable truths no longer holding, of upside-down logic. Though I can only sense that the stress occurs in the United States, it is certainly there in Europe—and particularly so in Great Britain, where many traditional assumptions and institutions are under question.
At a recent meeting of the parliament of the Church of England, the plaintive appeal was heard from the floor, “Why cannot the status quo be the way forward?” Although the speaker was answered with laughter, he was making a very important point. He was implying that we know how to cope with continuous change but not with discontinuous change. In conditions of continuous change, we project the status quo into the future, we run the curves up the charts, multiplying or dividing by appropriate amounts what we do today to meet the requirements of tomorrow.
Planning has to do with continuous change. Discontinuous change is quite another matter. What do you do when the cure runs off the paper? What do you do when today’s methods, however adapted, just will not work tomorrow? It is not easy. In spite of the French mathematician René Thom’s invention of a catastrophe theory, the rules to cope with discontinuous change are not known. How many blacksmiths coped with discontinuous change in their industry by becoming motor mechanics? How many organizations will—or can—cope with the discontinuities I see coming that I will try to describe in this article?
Fortunately, major-scale discontinuities do not happen that often. On the whole things do go on much as they used to, and we can progress by pushing those curves up or down our charts as appropriate by projecting past trends. But when discontinuities do occur, they upset things in a big way because then the underlying assumptions of the past no longer apply.
Let me give one example of a major discontinuity: the simultaneous development in the twelfth century, largely by the Cistercian monastery system, of water power and the deep plough in northern Europe. This new metatechnology was deeply disturbing to our forebears. No longer did every man have to prove his worth by hunting or growing food for his family. A few could feed the many. For would-be hunters these changes caused great role confusion and great trauma. In the end, however, the surplus energies of man produced the great cathedrals, cities, and culture that we call the Renaissance.
In a similar way, it is possible that the new microelectronic technology may so enrich man’s productive capacity over the next 10 to 20 years that a few could again provide for the many. But that is only one of several discontinuities hitting us at the same time. The switch from cheap to costly energy is an even more obvious one. So is the patent disillusion with Keynesian economics and its underlying assumptions.
Some will say, “What’s so discontinuous about the silicon chip—isn’t it merely an extension of the abacus?” Call it that if you like, but the chip, or whatever its successors are, will enable us to replace and extend man’s capacity for information processing. That does not sound too awesome until you think how much of our work is really information processing. More important, however, the changes the chip causes will reveal that some of our fundamental assumptions about the organization of work are based on an old reality, not a new one.
What sort of fundamental assumptions am I talking about? Let me give you an example. Not long ago, I wrote a book called Understanding Organizations, which was meant to be a cohesive summary of the management of organizations.2 I was invited to India to lecture about it. Gradually, as I traveled about that land, I began to realize that all our Western assumptions about organizations are based on the belief that labor is a scarce resource and capital a plentiful one. In India, the situation is reversed, and my book is worthless there.
I now want to look at some effects of discontinuous change that are about to hit our organizations, starting with a set of assumptions that have begun to reach the end of their usefulness. I will then go on to suggest some other assumptions that I see slowly emerging which may have to provide the basis of a new management. Finally, I will suggest some of the likely consequences of these assumptions for individuals and society.
Failing Assumptions
The feeling that trusted ways and known formulas have disappeared is the kick of discontinuous change. When all of one’s accustomed reflexes are suddenly inappropriate, one is disoriented, weightless. Like gravity in space, the following assumptions will be missed, but we shall have to learn to live without them.
Concentration + specialization = efficiency
For at least 200 years the underlying management formula has been that concentration plus specialization equals efficiency. If arguments have arisen about the formula, they have been about the appropriate forms of concentration or specialization. I want to suggest, however, that there is an inherent flaw in the basic formula that is gradually becoming more apparent.
Specialization produces specialists, and concentration gives them some essential part in a larger integrated process. The combination gives them unique power of a negative kind—the power to hold the organization for ransom by withdrawing their specialty. By taking one cog out of a clock, they hijack it. The only way management can counteract this tendency is by exacting from these specialists a countervailing commitment to the whole, to the total clock.
Much management thinking today concentrates on this problem of commitment. But the more you increase the size of the operation to get the benefits of concentration, the harder it is for each part to comprehend the whole, let alone feel committed to it. The result? Management tries to integrate operations at a cost that can only be held at bay by steadily increasing the scale, which in turn demotivates the specialists and increases the potential for a hijack. It is a snake biting its tail.
Since the Second World War, Great Britain has consistently sought scale and integration in her businesses, until today she has a greater proportion of large, integrated (and often monopolistic) organizations to small, discrete ones than any of her continental neighbors. Observers suspect that this fact may have something to do with Britain’s competitive weakness—it has exposed her more and more to the threat of corporate hijacks that have to be bought off. An old assumption has been pressed too far. Relationships that used to work, work no longer.
Labor is a cost
All Western business people have been conditioned to put labor on the profit and loss statement and buildings on the balance sheet. Although this practice is not rooted in necessary logic, it is an accounting convention that can exert a strangely powerful force. Costs are things to be minimized, controlled, allocated, and generally kept in their place. When you apply this philosophy to labor, the result, I suggest, is inevitable—work becomes regarded as a commodity, a thing to be bought and sold. If you own the commodity (i.e., you are the worker), you want to give as little of it for as much return as possible. If you are the purchaser or the employer, it’s vice versa.
One can see this view of work as a commodity creeping into the most unexpected places these days, even the professions. Marx foresaw this denigration of work into something to be bought and sold, although I don’t imagine he would have given the accountants as much credit for it as I have done. The consequences of this progression toward a commodity of work are necessary and unavoidable—alienation increases, management buys off the workers by paying increased prices for the commodity, which in turn increases the pressure to reduce the quantity of the commodity used. This tactic is unavailing because it results in an overall surplus of the commodity in society, which then demands that it be used: another spiral, another assumed relationship that no longer works.
Hierarchy is natural
People in organizations have long assumed that to put power and authority levels above one another is right and proper as well as essential for the proper workings of society. However, hierarchy confuses role with level.
Everyone recognizes that there are different jobs to do in an organization. What is not so obvious is that because those jobs are placed in a certain sequence (decision maker in front of executive in front of operator), they also form a ladder with the first jobs at the top in terms of power, authority, and reward. The connection between role and level, or sequence and rung, is even less legitimate if those at the top of the ladder have not arrived there by climbing it. Increasing specialization has led occupants of particular roles to lay claim to particular steps on the ladder, which can only spur others to make similar claims.
Hierarchy worked when obedience worked. As long as individuals grew up believing that some people had the right to order others about, particularly if they paid them, then it made sense to connect level with role, to give the power of command to those who were first in the decision-making sequence. However, today obedience on its own does not work. As a result, people increasingly challenge the ladder of command. We often commend current social attitudes without understanding that they pull the floor out from under a basic assumption of organizations—that of levels of command.
When three assumptions as basic as these begin to self-destruct, you really have a discontinuity. Then the assumptions have to change. What might the new ones be?
New Assumptions
Already we have some clues as to what the new assumptions are that managers will begin to see as inevitable truths.
Contractual organizations are most efficient
If one thinks of paying “fees not wages,” many different ways of establishing the contract of work between individuals and organizations become more feasible.
Fees are paid for work done, for output; wages are paid for time spent, for input. Professionals, craftsmen, and artists charge fees. They may calculate their fees on the basis of time, but the purchaser is buying the results of their time. Employees get paid wages. Wages turn work into a commodity. Increasingly, wise employees and independent-minded individuals look for fees not wages. The contractual organization, in which as much as possible is contracted out to individuals or to autonomous groups, is becoming more widespread. In part, this approach is forced on us by all the various costs in time, bureaucracy, and legislation of employing anyone.
The contractual organization is of course a very different animal from the employment one. For one thing, in the former the focus of control changes from input and process to output that is contracted to it. In the construction industry, each project is in effect a contractual organization. In Great Britain, Marks and Spencer has, without owning a single factory, built up a world-famous department store business renowned for quality. All the actual work is done by contractual production. It could go even further and franchise its sales outlets as happens in the catering industry. In Germany, Klockner-Moeller, manufacturers of switchgear equipment, do just that—franchising both production and sales. Wolfcraft, making power tools for the do-it-yourself market, has reinvented cottage industry (but with a high-technology base) and encourages its workers to assemble the tools in their own homes on a piecework basis.
I believe that we shall see more and more organizations forced this way—by economic rather than by ideological choice. But remember, the contractual organization will have to be managed in a very different way.
Labor is an asset
Subcontract as much as they may, organizations will still be left with a core of employed persons—career staff and labor. Legislation and public opinion are increasingly pushing management to change its concept of its responsibilities. Instead of finding labor to do the work that is needed, management will be urged to find work to fill the hands available. “If tires don’t sell anymore,” the laid-off workers said as Dunlop closed its tire factory at Liverpool in 1979, “management ought to find something for us to make that will sell.” If, after all, management has always regarded its physical assets as capital in search of an outlet, why not its human assets as well?
To many it seems an obvious assumption that labor is an asset, but accepting the assumption would have a revolutionary impact on the strategic thinking of many organizations.
Organizations are communities
Institutions are “out,” communities are “in.” The difference is not semantic. If we see organizations as communities, then we have to shift our thinking about size (communities require the possibility that each knows all); ownership (whether it be financial or psychological, and we can debate whether the former is a prerequisite of the latter); style of leadership (by consent, which is not the same thing as consensus, rather than by mandate); and authority (which should be earned rather than conferred). Because it is couched in the language of representative democracy, the debate about participative management obscures the authority issue. Community implies direct democracy and consultation rather than participation.
To managers reared in inherited traditions of bureaucracy and formal authority, the concept of organizations as communities will sound woolly, wayward, and wet. It need not be, and there are working examples enough to prove it.
What Organizations Might Face
When you start to link some of these new assumptions with the possibilities lurking in the new electronic technology, you can glimpse some of the implications for society as a whole. Some will strike most people as favorable, but some carry threats and problems.
Flexible lives
Many will find it possible to more freely determine how and when they will work. When work is measured by work done (fees) rather than by time spent (wages), the individual, or the group, will be able to choose whether he or she spreads the work thinly over the month or heaps it thickly at one part. For professionals or those with ready skills, it will be easier to stop and resume work throughout life.
The new technology-based, do-it-yourself industry will put a factory in every house or at least a fully equipped workshop in every community. With a new form of equipment rental, one will be able to buy time or a sophisticated industrial robot that is tuned-in to electronic monitoring devices. Starting with the $400 programmed sewing machine that brings the rag trade, or garment industry, into the home, examples are already here. Many will see this self-initiating approach to work as an opportunity, but many who relish the security of the factory or the office will be frightened by it. Not all of these latter people will find compensating support in the neighborhood community.
I should note in passing that this “flexilife” world has long been familiar to women. It is ironic that just as the female starts to adopt male work patterns, it is really he who should be imitating her.
The new economy
Today work is clearly differentiated from leisure. Whether in employment or self-employment, work has to be priced to carry the full overhead of living. Much work that used to be done, for example, by full-time, live-in help has been priced out of existence. At the same time, it is really no surprise that as a society we see both hundreds of thousands of unemployed persons and lots of work that needs to be done. That work, however, cannot be priced high enough to justify “jobs.”
But by setting effective wage ceilings, a combination of taxation and work sharing may change things. For instance, dirty jobs will increasingly be compensated for by higher pay so that, given high marginal taxation, it will not make economic or psychological sense to do such work for more than two or three days per week. Thus at least two people will do the same job, effectively sharing the work. Similarly, many of the new “contractual workers” will find that they can earn their optimum formal income in less than half a week.
Some evidence exists that people actually want to work at something for about 35 hours a week.3 The spare capacity thrown up by the new systems of work will not all go into television or football watching or even into gardening. Much of this extra time will go into voluntary and hidden economies, resulting in work done either for nothing or for barter or for marginal costs. Society will have difficult decisions to make. How much of this informal, even anarchic, economy can it stand? How much is “criminal,” how much beneficial?
Taking an optimistic viewpoint (not something the British are temperamentally inclined to do), we can see this “marginal work” producing a lot of the personal service, individual skills and crafts, and community-based work that we all complain has vanished from life. The fact that we can’t account for it should not stop us from welcoming it—although it probably will.
The bypass theory of change
“How will all this happen?” people may ask. Not, I fancy, by deliberate decision of parliament or government. Not often, I fear, by deliberate policy of big business or by support of trade or labor unions. One feature of discontinuous change is that those who benefit from it and promote it come from outside the existing systems. Naturally enough, those already in the system are more concerned to preserve what they can of the present way of doing things—as the member of the Church of England parliament so simply requested. If only the status quo could be the way forward, then we could get on with managing what we know. But, by definition, discontinuous change is not evolutionary, which is why periods of it get catalogued as revolutions.
Recently, I sat with the board of a medium-sized company, with $30 million in sales and 1,600 employees, discussing the general impact on the business of the new technology.4 We agreed that in time (5 to 10 years) technical development would make obsolete all that the company was now doing. The board members then went on to discuss their strategic plan as if the previous discussion had never taken place. Planning can only cope with continuous change. Discontinuous change needs a different approach (controlled experiment, I would call it) to cope with it and a different type of person (a risk-oriented, scientific optimist) to manage it. It seems, therefore, that these changes will not come from existing institutions but from new ones that will bypass their predecessors.
One feature of the new technology is its cheapness. It will therefore sprout a lot of low-cost alternative ventures—many will fail but some will succeed. Many traditional operators will wake up one morning to find themselves obsolete. For our more rigid institutions it will be a time of trauma.
Jam Today?
I have suggested some clues to the new assumptions that will underlie any new approach to the management of organizations. But, by definition, we cannot plan with certainty for discontinuity. All we know is what won’t work, not what will. We have to approach discontinuous conditions as experimental opportunities, seeing them as open-ended, not closed, problems—divergent, not convergent.
It was instructive to watch the approach of the big oil companies to the North Sea exploration exercise in Europe. Vast sums of money were involved in tendering for the exploration rights, in exploratory drilling, in developing the successful wells. The oil companies continually had to make forecasts and decisions about the future. They had to plan. But how? Normal planning procedures do not apply when so many of the parameters are unknown. One can only proceed by trial and error, by controlled experiment by hedging one’s bets, by fanning the sparks of success, and by quickly abandoning the ashes of failure.
The habit of decision making in closed groups—groupthink—is tempting when the fates are pushing us hard but has to be shunned so that all opinions, no matter how radical, get aired. Unless they turn to experiments, not plans that are intended as self-fulfilling prophecies, those now at the top will not have an easy time. Europe’s history is thick with those who thought the status quo could be the way forward in times of discontinuity. Most of them died before their time. Perhaps now, one would hope, we can all learn from history.
1. E.F. Schumacher, Small Is Beautiful: Economics as if People Mattered (New York: Harper & Row, 1976).
2. Charles Handy, Understanding Organizations (New York: Penguin Books, 1976).
3. Elliott Jaques, “Employment & Unemployment,” unpublished paper, Brunel University, England.
4. See Harvey L. Poppel, “The Information Revolution: Winners and Losers,” HBR January–February 1978, p. 14; and Daniel Bell, “Communications Technology—For Better or for Worse,” HBR May–June 1979, p. 20.
