A breath of fresh air changes the corporate climate

Companies need to change the atmosphere from stultifying to crisp. A new book tells how it's done, writes Roger Trapp

Even more than politicians, companies always claim to be something they are not. They say they are innovative when they are stuffy and old- fashioned; they claim to be flexible when - in spite of years of delayering, downsizing, re-engineering and the rest - they are still too formally structured; and they insist their people are their greatest asset, even as they consign many to the dole.

As Lynda Gratton, a professor at London Business School, said in a presentation last week, there is much rhetoric but little action. Why this is so is suggested by Sumantra Ghoshal, her colleague, who has published a book with his collaborator Christopher Bartlett.

Their thesis, set out in The Individualized Corporation (HarperCollins), is that business is operating by outmoded models. Reliance on strategy, structure and systems was fine early in the century, when Alfred Sloan and other engineers laid the foundations of modern management, but is not enough in an age when knowledge rather than capital is the important resource.

The authors argue that the three Ss should be supplemented, though not replaced, by three Ps - Purpose, Process and People. Heeding such matters as well as traditional fundamentals is, they argue, what sets apart the likes of 3M, Canon and ABB. Such organisations create atmospheres encouraging the initiative, creativity and commitment on which business success seems to depend.

Though Mr Ghoshal, professor of strategic leadership at LBS, uses the traditional armoury of charts and diagrams to make his points, the sense of what he and Mr Bartlett, a professor at Harvard Business School, are saying is best expressed through an analogy.

A true internationalist, Mr Ghoshal is an Indian who formerly worked at Insead, outside Paris. He visits his native Calcutta with his family every July because that is the only time his children have enough holiday. At that time the city is extremely hot and humidity is close to 100 per cent; so stultifying that Mr Ghoshal spends most of the time indoors, much of it in bed.

He contrasts that with spring in the Fontainebleau forest around Insead's base. The atmosphere is so clear and crisp it is, he says, "impossible just to go for a walk in the woods". You want to jog or jump up to touch the branches, so invigorating is it. Most companies, he says, are like "Calcutta in July" when they should aspire to resemble "Fontainebleau in spring".

They should do this by moving beyond strategy, structure and systems to purpose, process and people. Perhaps the most critical is the shift from systems towards people. As Mr Ghoshal and Mr Bartlett point out, the problem with the traditional approach is that, while top managers see systems as their vital link with operations, front-line managers regard them as "shackles" binding them to their desks and keeping them in their place. "In a service-based economy in the midst of a knowledge revolution, the old assumption that top management could define priorities and monitor operations through sophisticated information, planning, and control systems has become an illusion. The old-style corporate emperor has no clothes."

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