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How Ever Will We Manage?

Creating high-commitment and high-involvement work arrangements will naturally lead to a competitive edge.

September 15, 1997|JEFFREY PFEFFER | SPECIAL TO THE TIMES; Jeffrey Pfeffer is the Thomas D. Dee professor of organizational behavior at Stanford University's Graduate School of Business and the author of "The Human Equation: Building Profits by Putting People First" (due in February). His other books include "Managing With Power: Politics and Influence in Organizations" and "Competitive Advantage Through People: Unleashing the Power of the Work Force."

Work and the workplace are morphing at tremendous speed. In short order, we have evolved from a predominantly industrial nation to a land of "knowledge workers." Are yesterday's management styles obsolete? What approaches will be appropriate for managing tomorrow's workers? Here, two California authorities on organizational behavior speculate about the management model for--dare we say it?--the millennium.


Many of today's organizations know what to do, but few seem to do it. Instead of capitalizing on the ideas and energy of their people, they seek success in the wrong places: by merging to achieve economies of scale (even though there is almost no correlation between size and return on assets or shareholder equity); by downsizing (even though the evidence shows that all that accomplishes is to make the company smaller); or by pursuing some technological fix (although in 1996, Inc. magazine's list of America's 500 fastest-growing companies was headed by a consumer products distributor, a toothbrush manufacturer and a human resources service company).

Even as companies proclaim that "people are our most important asset," they often pursue "employability" and "career resilience" in contrast to policies of mutual commitment and employment security. They treat their businesses as portfolios of assets to be bought and sold and, instead of putting people first, outsource and downsize in ways that destroy organizational competence and capability even as senior executives are protected from suffering the consequences of their decisions by golden parachutes and employment contracts.

Successful organizations such as Men's Wearhouse, AES Corp. (a global independent power producer), Whole Foods, Southwest Airlines and ServiceMaster (owner of home-care companies such as Merry Maids and Terminix) understand that good management is about creating an environment in which work is fun because people have an opportunity to use their gifts and skills and are rewarded for doing so. Work should not be a four-letter word.

Here, briefly, is how things would work at Pfeffer Enterprises, my notion of a company for the future:

Good management would entail creating high-commitment and high-involvement work arrangements. These arrangements would help us recruit the right people by understanding that "people are hired for what they know and fired for who they are." They would help people understand the business and learn new skills. They would encourage people to work in teams and make them realize that the company cares about them and their futures.

Through these practices, we would produce the outstanding economic results that invariably come from having people with the capabilities and motivation to build sustainable competitive advantage--success that is inherent in the organization and that, therefore, cannot be easily bought or duplicated.

Will this high-performance model and the practices it entails actually be the management model of the future? How can it not be when in study after study it has been shown to result in performance that is typically 40% superior to the traditional management approach with its emphasis on control and a belief that a few people have all the intelligence. In an increasingly competitive world, an approach to management that consistently produces superior results will triumph if not from imitation, then from natural selection, as those companies with inferior productivity and quality fall by the wayside.

Ideas and financial capital move with the speed of an electronic impulse, and these more efficient markets for both knowledge and money mean that success needs to rest on other foundations. Regulatory and trade-based barriers to competition are also falling. What endures is competence and the organizational capability to rapidly discover mistakes and learn new things. These advantages are rooted in organizational culture and management philosophy and practices.

As an approach to management, it seems both simple and soft. It is neither. In industries such as men's clothing, grocery stores and airlines, companies grow mostly by taking business away from the competition. High-performance work arrangements produce ferocious competitors. And, although based on simple common sense, the idea is apparently not so simple to implement because it requires things in short supply--patience, courage and an ability to resist the blandishments of conventional wisdom.

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