In the last hundred years, two major events in management have changed the face of modern business, the first separating management from ownership and establishing the role of the professional manager.
The second is related to the emergence of giant corporations with a pronounced decentralization of management and the separation of operational and management staff. This form of an organization remains prevalent to this day.
Today, business is entering the third period of change.
In ten years, a large company will have twice as many levels of management and no more than a third of its managers as it does today.
Both the structure and the management problems of the business in the relatively near future will have almost nothing in common with those of the typical industrial company of the 50s, which is still considered as an example in textbooks. It is likely to be much more like those organizations that are not analyzed today by either hospital or university management theorists or the symphony orchestra.
Similarly, the typical business company will be based on information processing, and its staff will consist mainly of specialists who will guide and correct their activities through well-organized feedback from colleagues, users, and management.
Companies, especially larger ones, have no choice but to become organizations based on information processing.
The center of gravity in hiring labor is rapidly shifting from manual and clerical work to workers with specialized knowledge who find it difficult to fit into the "order-control" model borrowed from the military 100 years ago.
Modern information technologies are not the only necessary condition without which the creation of a new type of organization is impossible.
However, with the advancement of technology, we are forced to deal more and more with analysis and diagnosis, that is, with "information". Otherwise, we run the risk of being overwhelmed by data that we generate ourselves.
Most computer users use this technology only to do faster the work they did before manipulating ordinary digital data. But once a company takes the first steps from data processing to information processing, the decision-making process, its management structure, and even day-to-day operations change.
The first manifestations of this transformation process can be seen if we consider the impact of computer technology on decision-making for important capital investments.
There is no single sure way to analyze a capital investment project. Its correct assessment would have taken a huge amount of office work. And now anyone who has a computer and a program can do the job in a matter of hours.
The availability of this information turns the analysis of capital investments from a matter of opinion into a matter of diagnosis.
A second area that is affected when a company focuses its data processing capabilities on obtaining information is its structure. It is almost immediately clear that the number of management levels and the number of management staff can be sharply reduced.
The rationale is simple: entire layers of the management apparatus neither make decisions nor lead. Instead, their main function is to serve as "gears" human "amplifiers" of weak, obscure signals, which are considered communications in the traditional pre-information organization.
One of the largest American companies executing military orders made this discovery when asked what information is needed for the work of its management and operational management personnel.
When looking for an answer, it turned out that whole levels of government, six out of 14, exist only because such questions have never been asked before.
Information is a collection of data that has a specific meaning and purpose. Turning data into information requires certain knowledge, and knowledge is inherently specialized.
The "information" organization needs many more specialists than the corporation, managed by orders and control. Moreover, specialists are needed at the operational level, not at the top management level. The operational and production part of the company is increasingly becoming an organization of specialists.
Information-based organizations
Information-based organizations need more than ever such central services as legal advice, a public relations department (including advertising), and an employment department.
But the needs for service staff, ie people without operational responsibilities who only give advice or coordinate, are declining sharply.
There is almost no need for specialists in the directorate of the information-based organization.
Because the structure of large information-based organizations will be "flatter," they will look more like companies a century ago than modern large corporations. But in the past, all knowledge was in the possession of senior management.
All the others were assistants or contractors who did mostly the same work according to the orders received "from above". In the information-based organization, the knowledge will be available to the lowest operational staff, to the specialists who will perform a variety of work and will not need guidance.
The typical organization today, in which knowledge is possessed mainly by service personnel, whose place is somewhere between the top level of management and the level of operational staff, should be considered as an intermediate stage.
Finally, in an information-based organization, the work will be done differently. Traditional departments will serve as guardians of certain standards, as centers for training and distribution of specialists.
Such changes are already taking place in those departments of enterprises whose activities have the most clearly defined research character.
In the pharmaceutical, telecommunications, and paper industries, the traditional sequence of the research, development, production, and marketing stages is being replaced by synchronicity: specialists from all these units cooperate from the start of research to the delivery of the finished product to the market.
It is not yet clear how special task teams will be organized. The need for such teams, their appointment, composition, and management will be determined depending on the specific circumstances.
One thing is clear, however: they will require higher self-discipline and greater individual responsibility for the relationships and communications between their members.
It is very easy to say that information technology is transforming business enterprises. It is more difficult to decipher what such a transformation will require from companies and their management.
I think it is useful in this connection to look at the functioning of other information-based organizations, such as the hospital or the symphony orchestra.
The symphony orchestra is an extremely accurate example because the performance of some works requires the simultaneous collaboration of many musicians.
According to the theory of the organization, in such cases there should be several groups, headed and led by conductors "vice-presidents", and maybe by half a dozen deputies of these "vice-presidents". But the orchestra functions quite differently.
There is only one conductor in it (or "general director" ), and each musician is "subordinate" directly to this person without any intermediate instances. Moreover, each of the musicians is a highly qualified specialist artist in the literal sense of the word.
There are hardly any conductors who know how to play the French horn, let alone that they can advise the horn player on how to play this instrument. But the conductor's task is to focus the hornist's skill on the ensemble performance of the whole orchestra. It is this focus of effort that the leaders of any information-based organization should strive to achieve.
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