The Emerging Flexible Organization: Perspectives from Silicon Valley

The need for flexibility is discussed in a number of recent books. For example, see Handy C. , The Age of Unreason (Boston, MA: Harvard Business School Press, 1989); Kanter R.M. , When Giants Learn to Dance (New York, NY: Simon and Schuster, 1989); Peters T. , Thriving on Chaos (New York, NY: Harper and Row, 1987); Pascale R. , Managing on the Edge (New York, NY: Simon and Schuster, 1990).

These findings are derived, in part, from a study of 37 firms in the electronics sector, conducted during 1982–91. The firms varied in size, ranging from start-ups to multi-billion dollar corporations. Their businesses spanned several high technology industries—including computer hardware and software, networking and telecommunications, computer peripherals, semiconductors, and scientific instruments. Sources of data included structured and semi-structured interviews with a cross-section of senior executives and rank and file employees, analysis of internal documents, attendance at company meetings, and use of published data.

Speech given by Bill Joy, a co-founder of Sun Microsystems, at the Churchill Club, Palo Alto, California, 1990.

In an earlier article, it was argued that alignment between the apex and the core, or the generals and the troops, is critical in this context. See Bahrami H. Evans S. “Stratocracy in High Technology Firms,” California Management Review (Fall 1987).

Self-managing, multi-functional teams are considered to be the backbone of “fast cycle” companies. See Bower J.L. Hout T. , “Fast Cycle Capability for Competitive Power,” Harvard Business Review (November/December 1988). A “project orientation” enacted through “co-located, joint function teams” is viewed as the hallmark of innovative companies. See Peters T. , “Get Innovative or Get Dead,” California Management Review (Fall 1990), p. 23. A recent British study concludes that in today's business environment career success often hinges on project management (and hence team management) skills. The business section in London's Sunday Times, March 11, 1990. Additionally, since the Hawthrone studies we have known that groups are a critical source of individual commitment, loyalty, and identity—essential ingredients for managing professional and expectant knowledge-workers. For an insightful perspective on the Hawthorne Studies, see Roethlisberger F.J. , The Elusive Phenomena (Boston, MA: Harvard University Press, 1977).

For example, general contractors in the construction industry have relied on their longstanding relationships with specialist sub-contractors. The textile sector has historically evolved around an intricate web of relationships between different specialists: And the automobile industry has traditionally benefited from the diverse capabilities of its sub-contractors—each possessing a unique skill in a distinctive area. For further discussion see Powell W. , “Hybrid Organizational Arrangements,” California Management Review (Fall 1987).

Ibid.

Evans J.S. , “Strategic Flexibility in Business,” SRI Business Intelligence Program, Report #678, Menlo Park, California, December 1982.

As Kanter points out the broad implication is that “people's careers are more dependent on their own resources and less dependent on the fate of a particular company … no longer counting on the corporation to provide security and stature requires people to build those resources in themselves.” See Kanter , op. cit., p.357.

Speech given by Sullivan K. , Senior Vice President, Apple Computer, to the author's MBA class on Organizational Behavior at U.C. Berkeley, April 1991.

Miles and Snow characterize the firm of the future as a “network” in which “brokers” play significant roles as intermediaries. See Miles R. Snow C. , “Organizations: New Concepts for New Forms,” California Management Review (Spring 1986). Hedlund describes the emergence of “heterarchy” based on observations of Swedish multinationals. By way of contrast from their hierarchical predecessors, these firms are characterized by “diffusion of strategic roles, a wide range of governance modes, and holographic attributes.” Hedlund G. , “The Hypermodern MNC—A Heterarchy?” Human Resource Management Journal (Spring 1986). Child discusses how information and communication technologies have enabled many firms to “externalize” internal activities to contractors, and yet retain a certain measure of operational control—giving rise to novel organizational arrangements. See Child J. , “Information Technology and Response to Strategic Challenges,” California Management Review (Fall 1987). Handy describes the firm of the future as resembling a “shamrock”—comprising partners, consultants and part-time workers, as well as full-time employees. See Handy , op.cit.

Evans J.S. , “Strategic Flexibility and High Technology Maneuvers: A Conceptual Framework,” Journal of Management Studies (January 1991).

Ibid.

Hart A.G. , “Anticipations, Business Planning, and the Cycle,” Quarterly Journal of Economics (February 1937), p. 272

Shackle G.L.S. , Expectations, Investment, and Income (Oxford University Press, 1938).

Bell Atlantic and ABB are cases in point. See Kanter's R. M. interview with R. Smith of Bell Atlantic entitled “Championing Change,” Harvard Business Review (January/February 1991), p. 26; and Taylor W. interview with P. Barnevik of ABB in “The Logic of a Global Business,” Harvard Business Review (March/April 1991), p. 95.

Internal memorandum from the Executive Vice President of a $700 million high-technology firm on its business philosophy, May 26, 1981.

See Taylor , op. cit., p. 95.

On changes at B.P., see Lorenz C. , “A drama behind closed doors that paved the way for a corporate metamorphosis,” Financial Times, March 13, 1990, p.13.

See Bartlett C. Ghoshal S. , “Organizing for Worldwide Effectiveness,” California Management Review (Fall 1988).

See Chandler A.D. , Strategy and Structure (Cambridge, MA: MIT Press, 1962) on the historical evolution of the multi-divisional structure.

Child J. , “New Technology and Developments in Management Organization,” Omega, 12/3 (1984).

Source: Internal board presentation at a software company. The firm employs about 100 professionals in roles which are classified as “corporate.” These include “finance and administration” (corporate reporting, taxes, treasury, planning, investor relations, and internal audit), infrastructure support (facilities and safety, information systems, corporate purchasing, and risk management), legal services, human resources, and corporate communications.

See Bahrami H. Evans S. “Emerging Organizational Regimes in High Technology Firms,” Human Resource Management Journal (Spring 1989) for an account of the evolution of the formal structure in high technology firms.

Mintzberg H. , Structure in Fives: Designing Effective Organizations (Englewood Cliffs, NJ: Prentice Hall, 1983).

A good case in point is Bell Atlantic's “client-service” groups. During a recent reorientation process, many of its support functions have had to operate as line groups—enlisting the support of other units in order to continue their operations. In this case, the line units can either buy their required services from the support groups or from outside vendors; the only constraint is that they can not develop their own support functions. Reciprocally, the support units can also offer their services to outside clients, within certain competitive guidelines. In this way, the old staff entities have been transformed into line operations—with their own clients, revenues, profits, and direct accountability to the user. If the activity can not be supported, it is disbanded, in direct response to market feedback. See Kanter , op.cit. The point was also discussed by Ray Smith, Bell Atlantic's Chairman and CEO, in a keynote speech given at a U.C. Berkeley Executive Program, Sturbridge, MA, October 1990.

For a detailed study of how the human resource function is being transformed along some of these dimensions, see The Conference Board, “The Changing Human Resource Function,” Report number 950, New York, 1990.

This was the finding of a study conducted by the author; Bahrami H. , “Strategic Planning in Emerging and Established Firms: A Comparison,” paper presented at the fifth Strategic Management Society Conference, Barcelona, Spain, 1985.

See Karlgaard R. , “Sculley Looks Ahead,” Upside (October 1991), p. 101.

For more detail on how strategic decisions in high technology companies entail continuous re-calibration see Bahrami H. Evans S. “Strategy Making in High-Technology Firms,” California Management Review (Winter 1989); for a study on how effective executives in the microcomputer industry relied on real-time information to make decision, see Eisenhardt K. , “Speed and Strategic Choice,” California Management Review (Spring 1990).

Internal presentation, Apple Computer, September 23, 1988.

Spindler M. Speech given to Apple's worldwide sales force, March 1987.

Internal document on Apple's New Enterprise Project, 1988.

San Jose Business Journal, Special Report (March 1992), p. 14.

Personal Communication with executives at Apple Computer, 1990.

Indeed the phrase “people are our key asset” is often used not just in high-tech companies, but increasingly in traditional corporations. This is partly reflected in the recent focus on “human resources” as a critical function. See London's Financial Times. January 28, 1991, p. 14. Extensive reference to the importance of “networking” is another manifestation of this trend. In a recent article, Lorenz discusses the confusion surrounding the concept of the “networked” organization, especially concerning “official” and “unofficial” networking: “Official networks are certainly a praiseworthy advance over the bureaucracies they replace. But they are often little more than streamlined, well-run, and physically-dispersed committees … the real breakthrough is official blessing for all sorts of unofficial, informal networks … it is they, much more than the official variety, which will really help create the open and flexible learning organizations which most forward looking companies aspire to become.” “Network Organizations,” Financial Times, Management Page, April 3, 1991.

Personal Communication, W. New, M.D., August 1989.

Evans , op. cit.

It is commonplace to find employees assigned to new roles or seconded to other groups on a frequent and, at times, unplanned basis. For example, a key member of the engineering staff in a surveyed company was unexpectedly seconded for nine months to the manufacturing group because he was very knowledgeable about an outsourcing issue—a critical priority for the manufacturing group at the time.

See Powell , op. cit.; Evans , op. cit.; Kanter , op. cit.; Borys B. Jemison D.B. , “Hybrid Organizations as Strategic Alliances,” Working Paper 951r, Graduate School of Business, Stanford University, 1987; Mowery D. , International Collaborative Ventures in Manufacturing (Cambridge, MA: Ballinger, 1988); Ouchi W. Bolton M. , “The Logic of Joint Research and Development,” California Management Review (Fall 1988); Doz Y.L. , “Technology Partnerships between Larger and Smaller Firms,” International Studies of Management and Organization, 17/4 (1987).

See Besher A. , “Asian Investor Feast,” Upside, (November/December 1989).

In order to differentiate between the information given to “outsiders” versus “employees,” Apple has its “Hotlinks” electronic bulletin board which is only accessible by company employees.

See Rutter N. , “Kubota-San,” Upside, (January/February 1990).

See Bahrami Evans (1989), op. cit.

Interview with Maxfield R. , Executive Vice President and co-founder, ROLM Corporation, April 1985.

Well-known examples include ROLM and Ken Oshman, Digital Equipment and Ken Olson, Intel and Andrew Grove, Sun Microsystem and Scott McNeilly, Cypress Semiconductor and Rogers T.J. , Microsoft and Bill Gates, Software Publishing and Fred Gibbons, NeXT and Steve Jobs, ASK and Sandra Kurtzig, Electronic Arts and Trip Hawkins, Oracle and Larry Ellison, among others.

This contrasts with the practices observed in many traditional firms. As recent studies have shown, new activities in established entities are, by and large, initiated at the periphery of the firm [see Beer , “Why Change Programs Don't Produce Change,” Harvard Business Review (November/December 1990] or by lower level champions in an autonomous manner [see Burgelman R.A. Sayles L.R. , Inside Corporate Innovation (New York, NY: Free Press, 1986). This makes sense since in established firms those on the periphery have much to gain and little to lose by embarking on presumably risky, new initiatives. By contrast, their senior colleagues would have typically advanced in the organization by playing according to the prevalent rules, without disturbing the status quo. In the absence of a major crisis, many are thus likely to support a major change either under crisis conditions, or when it has proved to be feasible and entails minimal risk to the organization.

New technologies have provided the means to transcend the centralization/decentralization spectrum, see Child J. , “New Technology and Developments in Management Organization,” Omega, 12/3 (1984); and Child J. , “Information Technology and Response to Strategic Challenges,” California Management Review (Fall 1987); Huber G. , “The Nature and Design of Post Industrial Organization,” Management Science, 30 (1984); Markus M.L. Robey D. , “Information Technology and Organizational Change,” Management Science, 34 (1988); Zuboff S. , In the Age of the Smart Machine (New York, NY: Basic Books, 1988).

For further discussion, see Bahrami Evans (1989), op.cit.

Personal Communication, Executive Vice President of a software company, prior to a major re-organization, March 1989.

For an assessment of the critical role of corporate culture in business organizations, see O'Reilly C. , “Corporations, Culture, and Commitment,” California Management Review (Summer 1989).

“Managing at Conner,” Internal Employee Orientation Handbook, Conner Peripherals, 1992.