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What makes a company great? For most of the twentieth century, the factors that drove success were size, role clarity, specialization, and control. The larger a company was, the more efficiencies it was able to attain, the greater its ability to leverage capital, and the more powerful its clout with suppliers and customers. In the interests of efficiency, tasks were divided and subdivided, and individuals' roles and levels of authority were firm and clear. Specialties and subspecialties were created and encouraged, so that every functional area of the organization became a discipline in its own right. Above all, strong control was needed to make sure all the parts of the organization performed as needed, and to bring all the pieces together to produce whole products or services. As this century draws to a close, the advent of the microprocessor, the accelerating speed of information processing and communications, and the arrival of the global economy have knocked the traditional success factors - and the corporations that were wedded to them - for a loop. The not-so-old success factors are now, to a great extent, liabilities to success. What drive success today are speed, flexibility, integration, and innovation. Successful firms respond quickly to customers, get new products to market fast, and change strategies on a dime. Their people do multiple jobs, constantly learn new skills, and frequently shift to new assignments and different locations. Instead of subdividing tasks, such firms have learned how to pull together diverse activities and people on an as-needed basis, and to focus more on the streamlined process than on the specialized pieces. They champion the new and different, and set up processes and environments that encourage and reward creativity and innovation. The old success factors get in the way of speed, flexibility, integration, and innovation. Though size does not preclude speed, large companies are like tankers, requiring more time and space to shift direction. Role clarity locks people into specific job descriptions that hamper their ability and willingness to jump in and do whatever is needed, on a moment's notice. Putting a high value on specialization fosters a turf mentality that impedes integration. And multilayered systems of approval and control stifle creativity and drive away innovative people. The contrasting experience of two giant retail corporations illustrates the fundamental shift in success factors.
The Giant and the Upstart For decades, Sears was the world's largest retailer. It leveraged its buying power through strong centralized control. Almost all critical decisions were made at the Chicago headquarters, and all the stores mirrored the top-down control structure. Size, role clarity, specialization, and control made Sears a spectacularly successful enterprise for a very long time. In the 1980s, the retail game changed. Customers were demanding lower prices, better service, and an ever-fresh variety of merchandise. Speed became essential. Innovations in merchandise, service, and store appearance became critical to retaining a competitive edge. With its hierarchical structure and ponderous decision-making process, Sears could not do faster, better, cheaper, and it began to slip. As the losses mounted, management looked for new answers in the same old places - structure and control. A series of leadership changes, restructurings, and store closings failed to stop the hemorrhaging. Only when Sears shifted
Business Horizons, 9/1999. Ron Ashkenas. 00 Creating the Boundaryless Organization -1-
Attacking the Borders Organizations, by definition, are entities with boundaries. External boundaries separate a company from its suppliers and customers and define its geographic reach. Internal boundaries separate the CEO from the clerk, the finance department from the marketing department. Such lines of demarcation are, and always will be, necessary. But companies that thrive amid the new realities of global competition, rapidly emerging technologies, and changing markets are characterized by permeable boundaries along all fronts. We characterize this new model of success as the "boundaryless" organization. A boundaryless company is less like a fortress and more like a living organism. Its borders, along vertical, horizontal, external, and geographic dimensions, are like membranes - strong enough to provide shape and definition but permeable enough to permit an easy flow of information and ideas to all parts of the firm. Its form is not fixed and static. Over time, the vertical boundaries may change so that there fewer levels of managers. The horizontal boundaries may shift so that functions are defined or departments brought together in new ways. The external boundaries may evolve as different kinds of partnerships are formed with suppliers and customers. Organizational leaders can hasten the process of becoming faster, more flexible, more integrated, and more innovative by assessing the rigidity of their company's borders and
Business Horizons, 9/1999. Ron Ashkenas. 00 Creating the Boundaryless Organization -2-
Reinventing the Hierarchy The vertical hierarchy is an easy target for blame and criticism, but in fact some sort of vertical structure seems almost hardwired into human experience, beginning with the family. This form has persisted because it works. There will always be a need for leaders and followers. There can be no doubt, however, that an overly rigid system of top-down control drastically impedes organizational speed of response. When a firm is being crippled by vertical barriers, it will exhibit some or all of the following symptoms: * Slow response time. It takes too long to make decisions, respond to customer requests, and react effectively to changing market conditions. When new opportunities arise, the company is unable to seize the moment. * Rigidity toward change. "We've always done it this way" is the pervasive and persuasive rationale for continuing along familiar paths. People put more energy into resisting new ways and means than into adapting to new conditions and imperatives. * Underground activity. Creativity and innovation are driven underground because people know that new ideas will not be welcomed or even taken seriously. * Internal frustration. Employees and managers are dissatisfied with the way the company works and the way they are treated. They often feel that their contributions are not heeded, acknowledged, appreciated, or rewarded. * Customer alienation. Ultimately, customers become frustrated and angry, feeling that their needs go unrecognized and their complaints are not addressed. When the hierarchy is thus signaling that it has become dysfunctional, leaders should look to easing up the control on four critical dimensions: information, competence, authority, and rewards. This is not a matter of abandoning control, but of finding a better balance between the need for high-level authority and the need for agility and ingenuity. Information moves from closely held to widely shared. When everybody has access to the same information, common understanding and common purpose are created. Because information is power, the free sharing of information empowers. Only when people have the information can they be trusted and depended upon to make fast decisions that are in line with business strategy and objectives. Competence moves toward distribution of leadership throughout all levels of the organization. In traditional hierarchies, all the leadership ability is presumed to reside at the top. At lower levels, people have narrower technical skills. Boundaryless hierarchies encourage people to pitch in and do whatever they are capable of, regardless of rank or job description. They put a great deal of emphasis on training and development, including
Business Horizons, 9/1999. Ron Ashkenas. 00 Creating the Boundaryless Organization -3-
Moving Beyond Turf and Territory Horizontal boundaries are like the interior walls of a house. In traditional houses, the kitchen, dining room, and living room are closed off from one another with solid walls and doors. In recent years, however, many people have found that a more open arrangement suits their needs better. With permeable boundaries between cooking, eating, and sitting areas, people can move around and communicate more freely, participate easily in a variety of activities, and group themselves according to the needs and interests of the moment. And so it is in organizations. When the walls come down, communication, collaboration, and integration are greatly facilitated. The past 50 years have been a great period for "wall building" in organizations, as more and more knowledge specialties and subspecialties have been developed. No longer do companies have engineering departments, for example; they now have departments of chemical engineering, electrical engineering, process engineering, and more. This division process goes on in all functional areas. Drawing lines between the various specialties plays into the natural desire of human beings to associate with people like themselves, and helps people in large firms find meaningful group identity.
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Ron Ashkenas is the managing partner of Robert H. Schaffer & Associates, Stamford, CT, and a consultant on organizational transformation. This article is adapted from his book, The Boundaryless Organization, coauthored with Dave Ulrich, Todd Jick, and Steve Kerr (San Francisco: Jossey-Bass, 1995), which was reissued in soft cover in 1998, together with a workbook, The Boundaryless Organization Field Guide.
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