The Individualized Corporation: A Fundamentally New Approach to Management

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9780887308062: The Individualized Corporation: A Fundamentally New Approach to Management

Individualizing the Corporation.

The burgeoning global economy and the rapid pace of technological advancement have rendered traditional corporate organizations, and the techniques by which they were managed, obsolete. Many companies have responded to these changes with structural adaptations, but few have adequately realized the fundamental transformations that are required to succeed in this new environment. Sumantra Ghoshal and Christopher A. Bartlett describe the emergence of a new kind of organization in The Individualized Corporation: A Fundamentally New Approach to Management.

In their groundbreaking analysis, the authors identify three "core capabilities" that distinguish the individualized corporation: The ability to inspire individual creativity and initiative The ability to link pockets of expertise and entrepreneurial activity within the organization The ability to constantly renew the organization and its product, even if that requires making its own products obsolete.

The individualized corporation, the authors argue, requires a new understanding of the roles of both employees and managers. Rather than the undifferentiated corporate cogs of the "organization man" model, employees are encouraged to initiate new ideas and assume increased responsibility for their jobs. This new paradigm of employee behavior also requires managers to elicit, support, and coordinate these new behaviors.

Ghoshal and Bartlett profile a number of organizations that have successfully implemented this paradigm and transformed themselves into individualized corporations. Some, such as GE and Asea Brown Boveri, were once defined by the traditional corporate model and have now transformed themselves; others, such as 3M and the Kao Corporation, had never been so thoroughly defined by the old model; and still others, such as Intel and IKEA, have come into existence recently enough that they have built themselves upon the individualized corporation model from the start. All offer valuable management lessons that will be required in the next century.

In The Individualized Corporation, Ghoshal and Bartlett offer a new template of corporate organization and management that serves as a conceptual framework for managers and executives to apply to their own companies. At the same time, they offer examples of companies that have implemented this new paradigm and describe the techniques by which they have accomplished this. Finally, they consider the social role of the corporation, arguing that it is one of the last great institutions of society; the individualized corporation, they say, is the model which best satisfies this social role.

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About the Author:

Sumantra Ghoshal holds the Robert P. Baughman Chair of Strategic Leadership at London Business School.

Christopher A. Bartlett is the Class of 1966 Chair of Business Administration at Harvard Business School. As recognized experts in organization and management, their global clients include AT&T, IBM, Ford, Motorola, Pfizer, Procter & Gamble, Daimler-Benz, and the LG Group.

Excerpt. © Reprinted by permission. All rights reserved.:

Chapter One

The Rediscovery of Management:

From Organization Man to Individualized Corporation

In 1682, the English astronomer Sir Edmund Halley had the good fortune to be at the right place at the right time. His observations on the spectacular comet that now bears his name helped earn him the prestigious title of Astronomer Royal. More important to this professional scientist was the fact that this fortuitous opportunity inspired a flurry of other research activity that led to new and important discoveries about the nature of our universe.

While hardly on the same grand scale as Sir Edmund, we, too, have been fortunate to have had a front-row seat at a once-in-a-lifetime event--the collapse of an outmoded corporate form and the emergence of a new management model that we believe will propel today's companies well into the twenty-first century. At the heart of the emerging model lie not only some very different organizational practices and processes but also a fundamentally different management philosophy. In this book, we will describe this new management model and illustrate how some of the pioneers of this new approach have implemented it in their own companies.

But in order to fully understand where we are going it is important to recognize and acknowledge where we have been. So before we launch into our voyage of discovery, let us take you on a brief trip through the incredibly short history of the modern corporation--a history whose distinct stages are, rather remarkably, punctuated by the last few visits of Halley's comet.

OF COMETS AND CORPORATIONS

When it blazed past our planet in 1835, the comet heralded the birth of a new corporate form emerging simultaneously in Britain, the United States, France, and Germany. The concept of limited liability led to a proliferation of new corporations eager to meet the demands triggered by the production and transportation booms that had followed in the wake of the Industrial Revolution. In contrast to an earlier generation of specialist traders, producers, wholesalers, and merchants, many of these new companies began to develop as vertically integrated organizations that required a higher order of management skills to coordinate their multifunctional operations.

When Halley's comet returned from its next tour of the solar system seventy-six years later, the well-established functional organization was showing early signs of reaching its limits, and a new corporate model was emerging. Responding to the simultaneous demands of increasing scale (triggered by the new massproduction technologies), and increasing scope (encouraged by diversification opportunities for leveraging existing capabilities into new markets), a few pioneering leaders like Alfred Sloan at General Motors and Pierre Du Pont at Du Pont Corporation began experimenting with the revolutionary multidivisional corporate form. This innovation, in turn, gave birth to an entirely new model of "professional management"--one that has become deeply embedded in practice, spread by consultants, and legitimized in textbooks and business school cases over the past three quarters of a century.

With the era of mass production came the new and powerful philosophy of scientific management espoused by Frederick Winslow Taylor, an engineer and inventor who penned the highly influential Principles of Scientific Management (1911), based on his experience at Midvale Steel and Bethlehem Steel. Built on a belief that any task could be rigorously studied through time-and-motion analysis, broken into discrete activities, and executed by trained specialists, Taylorism not only resulted in a redefinition in the jobs of employees on the factory floor but also caused a revolution in the responsibilities of those who supervised them. Management's critical role became one of motivating and controlling workers in their tightly defined job descriptions, then ensuring effective coordination across these highly specialized activities.

At the same time, the diversification opportunities facilitated by the new multidivisional structure also had a powerful impact on management roles. In an environment in which capital had become the critical strategic resource, planning became a central part of modern management practice. With multiple divisional managers bidding for limited financial resources, companies began to develop sophisticated capital budgeting systems and strategic planning processes to guide the investments. To manage these processes and the related control systems that accompanied them, headquarters groups were expanded to ensure the quality of the information and to analyze it. As staffs' influence grew, so, too, did the policies and procedures that became their primary means of influencing operations.

But the new corporate model reflected more than just a new, complex structural framework and a more disciplined management approach. In this environment of control and coordination and of proliferating plans and policies, a new and different relationship started to develop between companies and their employees. Management's increasing preoccupation with the task of allocating capital and measuring its effective utilization led many to think of the company's employees less as valuable human resources and more as replaceable parts in an efficient production process. The difficulty was that unlike other inputs, people came with widely divergent capabilities and dispositions that made their behavior less predictable. As Henry Ford is reported to have said in exasperation:, "When all I want is a good pair of hands, unfortunately I must take them with a person attached!" Most of the complex new structures and systems overlaid with increasingly sophisticated policies and procedures were designed to minimize individual idiosyncrasies and make people "as predictable and controllable as the capital resources they must manage," as Harold Geneen put it when he was ITT's legendary control-oriented CEO in the 1970s.

This divisionalized structure with its associated professional management approach spread rapidly, fueled by the postwar boom that created market opportunities that exceeded companies' abilities to fund them and fanned by consulting firms such as McKinsey and Company that exported the model and made it as common in Europe as it had become in the United States.

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