CHAPTER TWENTY-FOUR
The Information-Based Organization
THE “OFFICE OF THE FUTURE” is still largely speculation. But the organization of the future is rapidly becoming reality—a structure in which information serves as the axis and as the central structural support. A number of businesses—Citibank, for instance, in the United States; Massey-Ferguson, the Canadian multinational tractor maker; and some of the large Japanese trading companies—are busily reshaping their managerial structure around the flow of information. And wherever we have been moving into genuine automation of manufacturing production, as in the Erie, Pennsylvania, locomotive plant of General Electric, we are finding that we have to restructure management and redesign it as an information-based organization.
The organization chart of an information-based system may look perfectly conventional. Yet such an organization behaves quite differently and requires different behavior from its members.
The information-based structure is flat, with far fewer levels of management than conventional ones require. When a large multinational manufacturer restructured itself around information and its flow, it found that seven of its twelve levels of management could be cut out. Similarly, in automated plants, for example, the Nissan auto assembly plant outside of Yokohama, Japan, and the GE locomotive plant in Erie, most of the traditional management layers between first-line supervisor and plant manager have disappeared.
These levels, it turns out, were not levels of authority, of decision making, or even of supervision. They were relays for information, similar in function to the boosters on a telephone cable, which collect, amplify, repackage, and send on information—all tasks that an impersonal “information system” can do better. This pertains in particular to management levels that “coordinate” rather than “do”—group executives, or assistants to, or regional sales managers. But such levels of management as remain in information-based organizations find themselves with far bigger, far more demanding, and far more responsible jobs. This is true particularly in respect to the first-level supervisor in the automated plant.
The information-based structure makes irrelevant the famous principle of the span of control, according to which the number of subordinates who can report to one superior is strictly limited, with five or six being the upper limit. Its place is being taken by a new principle—I call it the span of communications: The number of people reporting to one boss is limited only by the subordinates’ willingness to take responsibility for their own communications and relationships, upward, sideways, and downward. “Control,” it turns out, is the ability to obtain information. And an information system provides that in depth, and with greater speed and accuracy than reporting to the boss can possibly do.
The information-based organization does not actually require advanced “information technology.” All it requires is willingness to ask, Who requires what information, when and where? With nothing more high tech than the quill pen, the British asked those questions in India two hundred years ago and came out with the world’s flattest organization structure, in which four levels of management staffed by fewer than a thousand Britons—most of them youngsters barely out of their teens and “lower-middle management”—efficiently ruled a subcontinent.
But when a company builds its organization around modern information technology it must ask the questions. And then management positions and management layers whose main duty it has been to report rather than to do can be scrapped.
At the same time, however, the information-based structure permits, indeed it often requires, far more “soloists” with far more and different specializations in all areas, from technical and research people to service professionals taking care of special groups of customers. Citibank, for instance, recently appointed a senior vice-president in New York headquarters to take care of the bank’s major Japanese customers and their financial needs anyplace in the world. This man is not the “boss” of the bank’s large branches in Japan. But he is not “service” staff either. He is very definitely “line.” He is a soloist and expected to function somewhat the way the pianist playing a Beethoven concerto is expected to function. And both he and the “orchestra” around him, that is, the rest of the bank, can function only because both “know the score.” It is information rather than authority that enables them mutually to support each other.
Automated manufacturing plants have equally found that they need a good many quality-assurance specialists. These people, though very much seniors, hold no rank. They are not in the chain of command. Yet they take over as a kind of “pinch-hitting” superboss whenever any process within the plant runs into quality problems.
The information-based system also allows for far greater diversity. It makes it possible, for instance, to have within the same corporate structure purely managerial units, charged with optimizing what exists, and entrepreneurial units, charged with making obsolete what exists and with creating a different tomorrow.
Traditional organization basically rests on command authority. The flow is from the top down. Information-based organization rests on responsibility. The flow is circular from the bottom up and then down again. The information-based system can therefore function only if each individual and each unit accepts responsibility: for their goals and their priorities, for their relationships, and for their communications. Each has to ask, What should the company expect of me and hold me accountable for in terms of performance and contribution? Who in the organization has to know and understand what I am trying to do so that both they and I can do the work? On whom in the organization do I depend for what information, knowledge, specialized skill? And who in turn depends on me for what information, knowledge, specialized skill? Whom do I have to support and to whom, in turn, do I look for support?
The conventional organization of business was modeled after the military. The information-based system much more closely resembles the symphony orchestra. All instruments play the same score. But each plays a different part. They play together, but they rarely play in unison. There are more violins but the first violin is not the boss of the horns; indeed the first violin is not even the boss of the other violins. And the same orchestra can, within the short span of an evening, play five pieces of music, each completely different in its style, its scoring, and its solo instruments.
In the orchestra, however, the score is given to both players and conductor. In business the score is being written as it is being played. To know what the score is, everyone in the information-based organization has to manage by objectives that are agreed upon in advance and clearly understood. Management by objectives and self-control is, of necessity, the integrating principle of the information-based structure.
The information-based organization thus requires high self-discipline. This in turn makes possible fast decisions and quick response. It permits both great flexibility and considerable diversity.
These advantages will be obtained only if there are understanding, shared values and, above all, mutual respect. This probably rules out the finance-based diversification of the conglomerate. If every player has to know the score, there has to be a common language, a common core of unity. And this, experience has shown, is supplied only by a common market (for example, health-care providers or the housewife), or by a common technology. Even with a traditional command-based system, diversification that rests primarily on financial control, as it does in the typical conglomerate, has never outlasted the tenure of its founder, whether ITT’s Harold Geneen or Gulf & Western’s Charles Bluhdorn. But if the organization is information-based, diversification in which financial control is the only common language is bound to collapse in the confusion of the Tower of Babel.
The information-based organization is not permissive: it is disciplined. It requires strong decisive leadership; first-rate orchestra conductors are without exception unspeakably demanding perfectionists. What makes a first-rate conductor is, however, the ability to make even the most junior instrument at the last desk way back play as if the performance of the whole depended on how each one of those instruments renders its small supporting part. What the information-based organization requires, in other words, is leadership that respects performance but demands self-discipline and upward responsibility from the first-level supervisor all the way to top management.
(1985)