Part 2: 21C Process

Reengineering guru James A. Champy introduces a next generation of process change called X-engineering in the introductory chapter of Part 2. Champy sees the reengineering of the last decade as only a beginning, and in this decade the nature of work will change even more dramatically. And the corporation, once a closed enterprise, will become part of a much larger network of customers, suppliers, and collaborators, all working in concert to perform their work at new levels of efficiency. X-engineering requires a mastery of change across multiple enterprises and an objective beyond improved efficiencies. He relates the example of how Owens & Minor, Inc.—a $3-billion, Fortune 500 company—is revolutionizing its industry by applying the ideas of X-engineering. In fact, it was at work on changing its industry well before the term was even conceived. By paying attention to how employees actually divided their time among various processes and customers, O&M found that costs and profitability depended on a few key factors, most of them controlled by the customer. Finally, Champy explains three principles that underlie X-engineering: harmonization, transparency, and standardization.

Bosses and others at the top continue to dominate, exerting subordinate controls that extend far beyond the entitlements and jurisdictions ceded them by the organization chart. Subordinates continue to knuckle under, mimicking beliefs from above without openly expressing those courses of action they believe more corporately correct. University of California, Los Angeles, professor Samuel A. Culbert, and Chaminade University professor Scott J. Schroeder unleash the key to getting hierarchy to work in the 21st-century organization. They suggest that the key is changing the system to feature two-sided accountable relationships. The basic conditions are internalization of human-nature facts, appreciation for the politics that derive from self-interests, and a clearly articulated hierarchy that unambiguously delineates responsibilities and authorities so that decision makers are motivated to openly solicit other views prior to taking action.

Robert L. Heneman, a professor at Fisher College of Business at Ohio State University, and HR consultant Wendy K. Schutt propose some fundamental issues that need to be addressed by executives in order for basic reward principles developed in the 20th century to be successfully applied to the rapidly changing nature of work in the 21st century. The issues addressed in their chapter need to be considered if further progress is to be made at developing new principles of compensation applicable to organizations in the 21st century. In this chapter, they explore how to integrate reward systems with organizational learning systems, focus on execution as well as strategy, move from compensation to total rewards, design public sector rewards, revisit the concept of equity, and extend reward systems to new business environments.

The central purpose of enterprise is to create value for its shareholders. IMD Switzerland professor Derek F. Abell proposes a framework for understanding the underlying stakeholder purposes that influence organizational performance, and the leader's role in balancing these purposes and interests to achieve long-term sustainable success. He has raised questions not only about the validity, but also about the long-run efficacy of single-minded attention to shareholder value. Abell makes the convincing argument that what is evident is the need for leadership initiative at the policy, strategic, and operational levels simultaneously, and attention to not only the whats and hows of balanced leadership, but even more importantly to the whys. When any of these are ignored, focusing on shareholder value improvement up front is like pushing on a string; when these are all used in a coordinated fashion, the resulting broad commitment has the combined effect of tautening the string and pulling shareholder value upward.

Eminent thought leader Noel M. Tichy and researcher Christopher DeRose, both from the University of Michigan Business School, take us on a tour of the historical phases of organizational development (OD) in the final chapter of Part 2. They boldly argue that in the 1980s, Jack Welch, chairman and CEO of General Electric, fathered the rebirth of OD and why they believe so. In their well-researched chapter, they provide detailed example of Royal Dutch/Shell that demonstrates how leaders who see their primary role as leader/teachers, who lead change and develop human capital, can transform a business at its core. This case offers a compelling benchmark for OD practitioners everywhere for they have demonstrated solutions for helping leaders become teachers and scale this capability to thousands of people around the world, generating billions of dollars of new revenue and cost savings. The most interesting advances in OD in the future, Tichy and DeRose believe, will come from practitioners who are teaching leaders in their organizations to teach others.