The Future of Work and Corporate Organization, Roger Martin -- Rotman School -- Lifelong Learning, June 7, 2002, 8:25 a.m.

Roger Martin, Dean, Rotman School of Management, U. of Toronto

These participant's notes were created in real-time during the meeting, based on the speaker's presentation(s) and comments from the audience. These should not be viewed as official transcripts of the meeting, but only as an interpretation by a single individual. Lapses, grammatical errors, and typing mistakes may not have been corrected. Questions about content should be directed to the originator. These notes have been contributed by David Ing (daviding@systemicbusiness.org) at the IBM Advanced Business Institute ( http://www.ibm.com/abi).

Welcome

• Fourth annual lifelong learning event.
• Warrant people's degrees for life; recall annual, give a tune-up

Financial Times: trajectory

• No school that has started behind us, has passed us

Applications:

• Up 60%.
• More people who were given offers, have accepted.

Dominating media coverage

• National Post: 12 weeks, full page on competitive

Innovating the Integrative Thinking agenda

• One of 9 talks
• Next week, Peter Drucker.

Ways to get involved:

• Mentorship program.
• Business simulation in the spring first year, will need a board of directors, need alumni.
• Golf day

Today's session: An popular issue of "Rotman Management"

• Issue on Future of Work, thought would make it the theme for the program.

Agenda:

• Roger Martin
• Richard Florida, Carnegie-Mellon, new book, featured in last Saturday's New York Times.
• Concurrent sessions:
  • Mike Moldoveanu, new book, Master Passions, director, CCMF
  • McKinsey, The War for Talent
  • Doug Hyatt, economics,
  • Brian Silverman, strategy
• Don Tapscott, 25th on the list of gurus worldwide by Accenture
  • Taught The Future of Corporate Organization with Roger this year.

The Future of Work and Corporate Organization

Do you recognize this chair?

• Aeron chair by Herman Miller
• Who hasn't sit in an Aeron chair? (A few)
• Chair was introduced in 1995
• Replace the Equa chair: the biggest selling chair in the world, at that point.
• Replaced the Equa chair at twice the price: $400 USD to $800 USD
• Became the bestselling chair by far.
• Won the industrial design award gold medal -- over the decade, one of 36 items, and the only furniture product.
• Adjustable lumbar support, pellicle fabric, lighter and stronger plastics
• This is fabulous design by a company known for design

Who designed this chair?

• Bill Stump and Don Chadwick
• Bill Stump and Associates, Minneapolis
• Don Chadwick and Associates, Santa Monica
• The company known for design has a chair designed by someone else.

Who designed the pellicle fabric?

• Dupont

Structured plastics?

• GE

Thus, have a company that stands for something important, but doesn't do it itself.

• This isn't the first time that Herman Miller has done this.
• They've had a succession of designers.
• Had Charles Ames, the industrial designer of the century
• How should we understand this?

Look at the transformation of the determinants of competitive advantage over the past 100 years.

• Top 15 market cap companies in the world: 1928, 1969, and 2002
• (Dates picked because good data)
  • 1928 trailing edge of industrial age
  • 1969, mid-century
• 1928, 1969 Companies demonstrate stewardship over physical assets.
  • If you didn't have this, wouldn't be a large company.
• 1928 GM, U.S. Steels
• 1969, some physical assets, e.g. Exxon, Texaco
  • Companies got big -- large financial assets
• By 2002, would argue another type of asset:
  • Exxon, Mobil, BP are still there, although they're there because of mergers
  • The list has some of most innovative companies in the world
  • Grew with human assets
• Transformation of how to win is significant.

The role of physical assets

• Graph of a price index of commodities in real dollars, 200 years
• Long-term downward trend
• Physical assets that were important at the beginning of century, won't get you there
  • You now need to knock down 4 times as many trees, as 200 years ago
• Assets used by companies have shifted.

Five types of assets:

• Physical assets: plant and equipment, e.g. drilling / cutting rights
• Financial assets: Equity, debt capacity
• Human assets: e.g. experienced sales people
• Knowledge assets: things that don't walk out the door, e.g. patents, know-how, procedures
• Network / social assets: dedicated customers, reputation, alliances

From the raw numbers, would argue that physical assets mean a lot less than they use to.

With those different types of assets, have a strain on the traditional way we conceptualize organizations.

• Traditional view: organizations start with leaders
  • They formulate strategy
  • They head up a hierarchy
  • They create control procedures
  • They "sell" to get "buy-in"
• The rest of the organization is rank-and-file
  • They then implement the decisions
  • Have arms and legs
  • Need to get "bought in"
    • Comment: people get "bought in" and "sold out"!
  • They work in the hierarchy
• If don't have buy-in, and have to change the buy-in procedure for everyone else.
  • No one likes this, but everyone does it -- at the receiving end or giving end
• Formulators and implementers
• In addition, leaders are thought as individuals
  • A cult of leadership, e.g. Jack Welch
  • Think more as classes of individuals, e.g. executive vice-presidents

Does this make sense as a conception of an organization?

Limitations of the traditional view:

• In reality, there are no choiceless doers
  • If formulation is choosing, and implementation is something else, then it must be choiceless doing.
  • "It's a strategy, and it's important to do something with it".
• e.g. tellers
  • When working with companies, Roger tries to figure out who's great at their jobs.
  • Karen:
    • With some people, incredibly fast
    • Then other people would take 10 minutes, with conversations about anything but banking
    • Third group: talked, but about banking.
  • Logic:
    • First group see banking as a bother
    • Second group: banking as one of their important social events of the day. If they don't have a social experience with me, they don't like their banking.
    • Third group: people who want advice on banking
• Where in the manual is the three strategic segments?
  • No, she thought she's just doing her job.
  • Afraid that she would get fired: for doing.
    • Fired by people above, who didn't understand the three strategic segments.
• While the organization liked to think about her as a choiceless doer, she like to think about the three strategic segments.

Thus, a no-win situation

• If the organization wins, brilliant strategy
• If the organization loses, bad implementation

Can act like a choiceless doer, when you're not.

• Or can act like decision-makers, when they're not.

Increasingly hate getting treated as a class, rather than as an individual.

This has led to disaffection in the modern workforce.

From Fast Company:

• When you started with your employer, what did you think:
  • A. Mostly a way to make money
  • B. Meaningful, but not as much as rest of life
  • C. Just as meaningful as family
  • D. The most meaningful thing in your life
• When you started, and now.
  • B: 37% --> 52%
  • C: 46% --> 26%
• This shows up when people change jobs.

A chart from the "War for Talent" talk by McKinsey: The Desire for Individualization

• Importance to employee versus firm capability to deliver
  • People think that the firm can't deliver the things that are most important to them
    • Values and Culture
    • Freedom and autonomy

Human assets are become rare (in War the Talent)

• Pool of U.S. workers (with Canada similar) age 35-44
  • Grew to 2000, peak
  • Now shrinking
• Just as the nature of competition has shifted, from physical/financial assets to human assets, this is a triple-witching hour.
• Used to invest in assets: lawyers, accountants, etc.
  • At the same time, treat people as equal: one employment contract, set of benefits
  • Would customize for assets, and standardize for human resources
• Should reverse, now
• Need to pay attention

Had talked about disaffection, now what makes people happy?

• Diener and Suh, Culture and Subjective Well-Being
• What drives happiness?
  • If people are rare, then their happiness becomes more important.
  • Don't get happier by being richer, by being more handsome, by being healthier (after a point)
• Cycle:
  • Being a valued member of a community
  • ... that is valued by you ...
  • ... that is valued by others ...
• This is why pitchers for the Yankees are happy.
• Similarly, movie stars are happy
• Terrorists have a different problem:
  • They can be good terrorists, but people don't like them, so they're not happy.
• Teachers:
  • Used to be high on all three
  • Good teaching, everyone thinks they're great.
  • Now with unions and strife, teachers aren't as valued as much
  • Similarly with politicians and lawyers

The meaning for corporate organization?

Need to focus on choice, and community

• This loops us back to the chair

Need a different conception of the corporation:

• Choose - formulate - implement with selling and buying-in has to go.
  • It won't produce a sense of community
  • It's inauthentic: it's not how corporations work.
• Would argue that a more useful conception is of a long path of choices, all linked together.
• All choosers.
• Not all democratic, but there are higher-level choices, and lower-level choices
  • Nested choices
• Hard to figure out where choosing and formulation stops, and where implementation starts.
  • If you put all of the people in a room, don't dress them different, and ask them who is a chooser.
• Everyone has constraints, e.g. government, competition
  • It's a long task
• When you separate out choosers from implementers, then it wipes out the connection between people
• This gives rise to the consulting industry: asking the people at the bottom what's happening, who would tell the people at the top.
  • The people at the bottom don't want to tell the people above, because they're been treated as choiceless doers.
• Treat this as an infinite cascade

Having choices together creates a community.

• In this world, what's your job, regardless of where you are in the chain?
• Three useful jobs, oriented towards making a more productive community:
  • 1. Make choices -- ones that you're distinctively more qualified than someone below.
    • People fool themselves with this.
    • Not necessarily more experience.
    • People below may have direct choices.
  • 2. Structure the context for the choices below
    • I've made this choice, here are the choices you can make
    • Assign the decision rights.
  • 3. Offer to help the colleague with the assigned choice
    • May consider revisiting choices, if there are shortcomings.
    • Ratify the next level choices: great, that's fabulous, so that they can do the same thing at the next level.
• This isn't democracy, not a flat organization, but a different conception of working together.
• Have to make the people best-qualified to make choices
• Need to give them information on how good or bad their choices are
• These play a big role in creating a community.

Creating a productive community has the key features

• Needs dynamics: self-directed community
  • Needs to be voluntary
• Decision-making style as mutual, inclusive and diverse
  • People who are nearest to knowledge have to bring insight
• Has to feel authentic: trust, respect amongst choosers
  • When no trust and respect, no feedback to upper levels.

The optimal organization of the 21st century is a nexus of communities

• Herman Miller is an example of this
• A company with a design sensibility that makes it a cool place to do work with.
  • A view that you don't have to be a Herman Miller employee, just a part of a community
• Other companies say you have to be a full-time employee, which people don't like.
• Even though Herman Miller's advantage is furniture design, it needs to operate as an organization to make the community of designers want to work with them
  • They have to be good at managing the community, not the design itself.

The firm of the 21st century will be like this.

• Software communities, (not necessarily to Linux) but have communities of beta testers

Stump & Chadwick are making money off the Aeron chair, but Herman Miller is making a lot more.

Managing the subjective well-being will be how people maximize knowledge assets.

Questions

William Dale, class of 2000: What are the prospects for the traditional firm to transition to this new structure? Some firms think that you need to dissolve and recreate, which hurts. What can some firms do? How does empowerment fit in?

• It's a tough challenge, like the shift from centralized computers, to client/server, to distributed computing.
• One of the weapons is authenticity
  • Right now, the conception of formulators and implementer is not true.
    • Don't fake that we are.
  • In the client-server world, did have to blow up.
• Hard: the job of senior management
  • It feels like letting go
    • Actually people already make those choices.
• Senior management has to want to challenge their own view.
  • Otherwise, their people will leave, and the company will crash-and-burn
  • e.g. Clayton Christensen you're running a "legacy" corporation, when will you (leaders) take the action?
  • It may be easier than you think.
  • Create the community
  • We'll listen.

Class of 2001: Work for a legacy company. What makes our unit productive is that the senior people know and signal that one person can't be as smart as 60 people. Everyone is an expert in his or her field. Decisions are made at the lower level. Leaders channel, shield, promote. Work for Bell Mobility, part of Bell Canada.

• Identification of the holders of specific knowledge
  • Mike Jennies differentiates between general knowledge and specific knowledge.
    • General knowledge can be moved around the company.
    • Specific knowledge, e.g. in the head of a sales person, how to sell a specific person
  • Have to allocate decision rights to right person
    • If move everything down to the bottom, no coherency, with general knowledge
    • If everything is at the top, no specific knowledge.

Shelly Ernworth, class of (1971): On the war for talent, should we think globally, e.g. India. On the basis of birthrate, in Canada, we'll have 11 million people in Canada by 2050. Focus on public sector. The desire of individualization. IBM went outside the company, and the industry to get a different perspective. In public sector, hire people for policy potential. What needs to happen to leadership?

• Agree with demography, baby boom is local to country
• There are significantly people of North America that would have broken down except for India and China.
  • Challenge: may be denuding developing countries of their best people.
• A lot of the "subjective well-being" happens in small not-for-profit people.
  • In civil service, much more in job classification.

Gloria Russell, class of 1987: People being brought into organization based on leadership and expertise. What about working today, as opposed to working for a competitor tomorrow? What about people who are solid workers, who don't need these leadership skills.

• Teaser: come back next year, to discuss this latter issue.
  • Complicated issue.
• The important terms of competition: there will be a lot of free agents.
  • Want to have them think that you'll be giving something up, that free agents won't go to competitors.
    • Don't need to contract for exclusivity.
  • Are you the best community, attractive to the skilled?
• That's why culture, field, atmosphere and community is more important.