The Soul of the New Organization

n organization is more than a set of products and services. It is also a human society, and like all societies, it nourishes particular forms of culture- "company cultures." Every company has its own language, its own version of its history (its myths), and its own heroes and villains (its legends), both historical and contemporary. The whole flourishing tangle serves to confirm old-timers, and to induct newcomers, in the corporation's distinctive identity, and in its particular norms of behavior. In myriad ways, formal and informal, it tells them what is okay-and what is not.

Despite their many differences, there are great similarities across most contemporary organizational cultures. Certain themes resonate almost everywhere: avoiding blame and responsibility, treating co-workers as competitors, feeling entitled, and not feeling intense and committed. This commonality is hardly surprising. Most of today's corporations were born and raised in the same business environment, subject to the same pressures and issues. And because nurture definitely dominates nature in the business world, most companies, facing a common context, developed a common culture.

The key feature of the environment in which most contemporary organizations came of age is that, by and large, for the last 200 years demand exceeded supply. It would be an exaggeration to say that corporate growth in this era was purely demographic-a simple matter of the growing numbers and purchasing power of consumers-but it wouldn't be much of one. On the whole, from the last quarter of the 18th century to this, the last quarter of the 20th century, producers have consistently had the upper hand over consumers. Except during downturns in the business cycle, there were always more people-or companies-who wanted to buy than there were goods or services to satisfy them. Whether it was automobiles, telephone service, or soft drinks, the dominant concern for the modern corporation has been to keep up with apparently insatiable demand. The primary goal was not making mistakes. With a market waiting to be taken, brilliance and innovation were unnecessary; caution and plodding could be counted on to carry the day. So why take risks? The highest values were those of planning and control and discipline, the values needed to capitalize on a ready market.

This business context fostered company cultures that were strangely at odds with America's independent and democratic spirit. You might suppose that nothing could go more against the American grain than having to make a career, or at least a living, in organizations that were at once paternalistic, controlling and bureaucratic. Here was a hat trick, if there ever was one, against personal freedom! Yet, in fact, so it was for everyone except those lucky few who scrambled their way through bureaucratic warrens and up the hierarchical pole. Most everyone else, workers and managers alike, found life in the Industrial Era corporation stifling and disheartening. Inventiveness was frustrated by protocol and work rules. Ambition expressed itself more in politics than in productivity. Craftsmanship was a thing of the past, and creativity a thing of the future-for after-hours.

The Old Deal

Why did people put up with this for so many years? The answer is obvious-security. Even Americans were never so in love with freedom, independence, risk-were never, in a word, so entrepreneurial-that they would blithely brush aside the value of employment security. To oversimplify (but again not by much): At the heart of the old company culture was a deal-obedience and diligence in exchange for security, security for obedience and diligence. The deal was not always simply struck: Many workers had to unionize and strike to get real security (not to mention higher pay); management had to supervise and bureaucratize to get the other side of the bargain. But the deal was there.

No longer. An historic chain reaction is under way-enormous change in the business environment forcing deep changes in company cultures-and the cumulative effect is a deal-breaker. The rise of the demanding customer is the crucial precipitating factor in the chain reaction that is doing in the security-for-obedience-and-diligence deal. When the customer comes first in the environment, something has to adjust in the company culture. The customer cares nothing for our management structure, our strategic plan, or our financial structure. The customer is interested in one thing only: results, the value we deliver to him or her. A customer focus forces an emphasis on results, and on fashioning a culture that supports their delivery.

The effect of the modern customer on the security-for-obedience-and-diligence deal can be felt already. When a customer calls the tune, everyone in a company must dance. But this means letting go of commands; no system that depends on segregating wisdom and decision-making into a managerial class can possibly offer the speed and agility customers demand. It also means letting go of metaphors like "hands." Customers require whole human beings possessed of hands, heads, and hearts, to serve them.

In the new regime, managers are not the deciders of the fate of employees-customers are. The company does not close plants or lay off workers-customers do, by their actions or inactions. Samuel Gompers might plausibly throw his slogan of "More!" in the face of a monopolist or oligopolist. His antagonists controlled their markets and their customers; if they wished, they could give employees a bigger cut of their pie. Now, it verges on the comical to read screeds against "giant and powerful multi-national corporations." The corporations I know are closer to "pitiful helpless giants," all running scared of their customers. When the customer comes first, the company and its employees must, perforce, come second. Our needs must be subordinated to those for whom we are creating value.

Like it or not, security, stability, and continuity are out, because there simply isn't anyone on the scene who can provide them. The company can't because the customer won't. Companies are not cold or cruel or heartless. They are merely running as fast as they can to keep up with demanding and unforgiving customers. The people who work in them will have to do the same. A sign should now hang in every factory, office, and work site: "You're on your own." It's not that no one cares about you; it's just that there is nothing anyone can do about it.

Commitment to Success

But the new regime also offers compensation for the withdrawal of the power of command (from managers) and the withdrawal of protection from customers and the market (from all employees). It offers freedom and personal growth. The essence of the new deal in the modern organization is an exchange-initiative for opportunity. The company offers its employees the opportunity (and often the educational means) to achieve personal success; in return, the employee promises the company to exercise initiative in creating value for customers and thereby profits for the company.

Obedience and diligence are now irrelevant. Following orders is no guarantee of success. Working hard at the wrong thing is no virtue. When customers are kings, mere hard work-work without understanding, flexibility, and enthusiasm-leads nowhere. Work must be smart, appropriately targeted, and adapted to the particular circumstances of the process and the customer. Imagination, flexibility, and commitment to results are what's needed. If the results aren't achieved, you can no longer claim, "But I did what I was told and I worked very hard." It doesn't matter. Your are accountable for results, not for effort.

Without protection, there is no reason to obey; and with obedience goes its cousin, loyalty. "Loyalty to company" as a cultural artifact is replaced by "commitment to business success." The quasi-feudal assumption of the Organization Man-that putting the interests of the company first was dispensation from further responsibility and guaranteed personal success-is now ridiculous. Without results, without "business success," loyalty is an empty gesture. Since it no longer guarantees success for the organization, it can no longer guarantee success for the individual. Loyalty and hard work are by themselves quaint relics, about as important to contemporary business success as the ability to make a perfect dry martini. Indeed, organizations must now urge employees to put loyalty to the customer over loyalty to the company-because that is the only way the company will thrive.

No longer is the company the "head," the employee the "hand." The employee is now assumed to be a mature, capable, self-reliant adult. The company does not promise to take care of the employee-which is just as well, since such a promise would be a false and empty one. "Taking care of one's employees" implies a degree of control over one's environment-that one can really intercede with the forces around you to shelter people from their impacts. This promise may have been realistic once but is laughable now. Instead of protection, the company owes its people opportunity: the chance to do well, to succeed, to grow in one's career.

Instead of "training and retraining"-a model in which the employee is the object of external forces-the new deal is "the offer of training." Should an employee leave the company, he should be able to do so a more capable and knowledgeable individual than he was on arrival. But there's a proviso to this: provided he takes advantage of the opportunity. Gone is the notion that somehow the company has the obligation to develop you.

Whether these changes are good or bad is a value judgment that must be made by every individual. Some will consider the new regime to be liberating and empowering; they will see it as conveying dignity and autonomy to every employee, by eliminating the controlling and confusing network of rules that have confined most people in their work lives. Others will see it as a harsh and cruel new world, a Darwinian jungle where only the fittest survive-and only temporarily.

I prefer to simply call it realistic. For too long the large organization has in fact provided a fantasy environment, in which people could pretend that there was such a thing as security. By working hard and following the rules, the uncertainties of the outside world could be kept at bay. The organization provided a buffer against reality, a comfortable zone of predictability and stability. So long as demand exceeded supply and customers were docile and subservient, the fantasy could continue. No longer. Corporations no longer dominate their landscapes, controlling their customers and securely deciding their own futures, any more than start-ups do. The large company and its employees must get used to the environment and lifestyle to which their entrepreneurial cousins adapted long ago-an environment of uncertainty and anxiety, but also of exhilarating freedom. It may not be to everyone's liking, but there is no going back.

In effect, the qualitative difference between large companies and small ones, between young companies and established ones, between those who create markets and those who control them, is gone. It has been replaced by a mere quantitative difference. Large businesses are no longer very different from small ones; to paraphrase Hemingway's comment to Fitzgerald: they simply have more people. And if a large corporation is, in effect, becoming more like a small company, then everyone who works in it must start acting and thinking like an owner of a small company. Our new role model is no longer the corporate manager but the entrepreneur. No one needs to tell the small company owner of the need to stay close to the customer, to remain flexible, to respond quickly to new situations.

This is not theory; this is reality. The 21st-century organization is characterized by responsibility, autonomy, risk and uncertainty. It may not be a gentle environment, but it is a very human one. Gone are the artificial rigidities and disciplines of the conventional corporation. In their place is the messiness, challenges, and disappointments that characterize the real world of real human beings.

Michael Hammer is the father of the reengineering movement. His books Reengineering the Corporation (HarperCollins, 1993, co-authored with James Champy) and The Reengineering Revolution (HarperCollins, 1995, co-authored with Steven Stanton) have sold millions of copies worldwide. This excerpt from Hammer's forthcoming book, Beyond Reengineering, (copyright © by Hammer and Company) is reprinted by arrangement with HarperCollins Publishers, Inc.