Marketechnics Report: The Power of Letting Go

Feb 14, 2005

By Bill Bittner

The opening session at the Food Marketing Institute’s annual Marketechnics show yesterday stressed how technology will affect how we will work and make decisions in future organizations.

This year, Thomas Malone of the MIT Sloan School of Management addressed the audience on “How the New Order of Business Will Shape Your Organization, Your Management Style, and
Your Life.”

Mr. Malone has written a book, The Future of Work, in which he describes the effect of increased human freedom on business. Increased freedom results in lowered costs
for communicating information throughout the organization, says Mr. Malone.

Going forward, decision-making information will be accessible to frontline personnel who will be able to provide direct and more immediate feedback to the central authority monitoring

Driving decision-making to the frontline means companies must adjust reward structures to align with the goals of the overall organization. Ultimately, organizations may be formed
out of completely independent teams or individuals. Mr. Malone provided the example of eBay, which is formed from individual entrepreneurs who have demonstrated the quality of
their performance through the development of personal histories.

He attributed the evolution of democracy “over the past 200 years” to the discovery of the printing press and the ability to communicate easily with large numbers of people.
This allowed civilizations to move from tribes to monarchies to democracies. Now it is allowing businesses to decentralize their organizations as they move from top-down hierarchies
to democracies and, ultimately, to market structures.

He described AES, which is a large utility company whose loose hierarchy operates through careful hiring practices that allow delegation of decision-making based on employees
seeking “advice” instead of permission from supervisors.

Employee-owned companies such a Publix, and Whole Foods where co-workers vote on new hires, were identified as examples of business democracies. Market organizations were described
as professional services organizations where independent service providers market their own skills. An example was movie production performed by teams of actors, cameramen, directors,
set designers, etc. to complete a production.

The manager of the future must be prepared to move from a role of “Command and Control” to one of “Coordination and Cultivation.” He must be able to explain the paradox of “standards”
as they provide a framework for individual creativity and understand how he can gain power by relinquishing control. People will have more choices in their work and personal lives.
It becomes important that they understand their personal goals and coordinate them with those of their employer.

Moderator’s Comment: During the question and answer session, one of the retailers asked how he can implement some of these ideas in a unionized labor
environment. Mr. Malone said that may be a challenge, but the unions will also be affected by the new communication capability. Do you think it is possible to create a reward
structure in a unionized environment that aligns individual employee goals with those of the company? Conversely, are top-level managers willing to give up power and go from a
command and control structure to one of coordination and cultivation?

It may be more challenging, but I believe union management is beginning to understand that the threat of non-union competitors on the future of their jobs
is becoming more real than in the past. They are beginning to appreciate that their welfare is aligned with the success of the company and they must do more to help the larger
organization succeed. If the reward structure can be designed to allow both employees and the stockholders to benefit from greater success, then everyone will benefit.

Bill Bittner – Moderator

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4 Comments on "Marketechnics Report: The Power of Letting Go"

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M. Jericho Banks PhD
M. Jericho Banks PhD
17 years 3 months ago

What a concept! Listening to your front-line employees! Wish I’d thought of that.

Unfortunately, Thomas Malone didn’t take into account some critical features of human nature – power and politics. In the absence of a clear structure for responsibility in a company, strong personalities take over and establish their own fiefdoms. Consider the formation of hierarchies among prison inmates for an extreme example of this type of dynamic. Personality cults are formed and begin to make their own decisions.

More communication is almost always productive. But, businesses still have to be managed. Encouraging entrepreneurship and feedback from employees is commendable. This requires more management, however, rather than less.

David Livingston
17 years 3 months ago
When I see something written by someone from the XYZ School of Management, I envision someone with high forehead and patches on the elbows who has never worked in “reward” type situation. Don’t get me wrong; what he is saying is absolutely correct. I don’t think it’s probable that a reward structure in a unionized environment, that aligns individual employee goals with those of the company, can be implemented. Otherwise, it would probably eliminate the need for the union. It would take years of re-education to change the union mentality of making as much money as you can while doing as little as you can. This type of structure eliminates unproductive employees, something the labor unions have helped to protect. Sure it’s a great idea. We’ve seen lots of successful examples. But the unions would never go for it because it would decrease the need for organized labor. Publicly held companies would not go for it because the “rewards” must go to the stockholders. The combined forces of greed between union bosses and investors are… Read more »
Anna Murray
Anna Murray
17 years 3 months ago
I’m about to sound like a raving conservative…which, as a real leftie, makes me rather uncomfortable. I lived in Michigan for 12 years — the heart of union country. And the complexity of the union culture leaves me really perplexed about how companies and employees can shift into a new way of working. Lots of old-time union members don’t want things to change. It’s human nature, I guess. These folks view companies through a lens of 30 years ago, in a much more paternalistic way. Being a “good worker” means working within the structure, and doesn’t have a lot to do with taking control and innovating. This kind of ethic is passed down, generation to generation. It’s surprising how many young people still have this perception. And yet I understand that anti-union stances, like that of Wal-Mart, make people nervous. They make me nervous too. As the pendulum swings away from old-style unions, are we going to end up all the way at the other extreme, where workers rights are in jeopardy? And, no, top-level… Read more »
David Mallon
David Mallon
17 years 3 months ago
It isn’t always best to push decision-making down in an organization. Futurists have been selling this notion for years, and it’s an oversimplification. There are many factors which determine the best level for decision-making. Further, modern information technology works in both directions; distributing information downward, but also making it possible at the top to gain greater insight and to more quickly communicate direction. As a simple example, look at play-calling in the NFL. Quarterbacks once called their own plays. Today, quarterbacks are better prepared for games than ever before with digital film study, still photos of the game available on the sidelines between series and phones to talk to coaches in the box. But few quarterbacks call most of the plays. Coaches have a better, more analytic perspective. They can track what’s been called during the game, what defenses are being used and the results of each. They have a better view of the whole field. While technology has made QBs more capable of play-calling, it also has enabled top-down play-calling. QBs have headphones in… Read more »

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