Why power to the people is not such a stupid idea

One of the fundamentals of modern management is that the traditional organisation is dead. In place of businesses structured according to finance, manufacturing, research and development and the rest, there are non-hierarchical enterprises filled with self-managed teams of empowered individuals.

The only problem is that it is not true. Or, at least, not to the extent that has been claimed. One person who is not surprised by this is Frank Ostroff, a management consultant. He believes that change has been resisted because of the absence of an appropriate model.

Unsurprisingly, his book The Horizontal Organization (Oxford University Press) seeks to provide that model. While there have been certain "early adopters" of what Mr Ostroff says is the most fundamental change in the way that organisations are organised since the Industrial Revolution, he believes that the generally slow take-up is down to a failure to pass two acid tests.

The first is whether you are in part of an organisation structured around core processes that deliver value rather than function. If you are not, you could be flat, he says, but you are not horizontal.

The second is the extent to which companies align various skills and behaviours. To be effective, organisations have to do more than just change their structures, says Mr Ostroff. That requires them to adopt 12 principles - such as organising work around processes rather than tasks and functions; flattening the hierarchy by minimising the sub-division of workflows and non-value-added activities; assigning ownership of, or responsibility for, processes and performance; linking performance objectives and evaluation to customer satisfaction; informing and training people on a "just-in- time-to-perform" rather than a "need-to-know" basis; maximising supplier and customer contact; and rewarding individual skill development instead of just individual performance.

If all this suggests a strong human element, Mr Ostroff is unrepentant. For all the talk of "people being our greatest asset" and the like, management initiatives of recent years have tended to focus on operational, or structural, matters rather than those that might inspire and encourage people.

And while downsizing, quality programmes and the rest have usually been necessary in the interests of competitiveness, they do not create the sort of transformation that Mr Ostroff is looking for on their own.

This is hardly surprising. As Mr Ostroff points out, companies tend to be conservative - and so like to revert to what they know. And this tendency to go for one thing is one of five drivers that he identifies as crucial to finding a new way of organising companies for their long-term survival.

The others aree heightening competition in the business environment; the need for cross-functional organisations to support the development of such notions as integrated supply chains; the increasingly widespread acceptance of enterprise resource planning and other programmes spanning organisations rather than departments; and the growing importance of electronic commerce and the corresponding need to be able to respond quickly and effectively.

Indeed, turning around organisations of all sorts so that they face their customers rather than their senior executives is the key message of Mr Ostroff's book. After all, it is hardly worth going to all the trouble of redesigning organisational processes if their structures prevent them achieving their objectives.

But Mr Ostroff is also adamant that this is not only about improving company performance, though he is quite sure that this will necessarily flow from such an exercise. "It improves the return to shareholders, but it's not mean," he says, adding that striving after the horizontal organisation - while not achievable for everybody - creates better performance for customers and shareholders and makes better places in which to work. A point that is not lost on Mr Ostroff and his colleagues at a time when the "battle for talent" is emerging as the key corporate challenge.