Harvard Business Online

Why We Need Big Organizations


Posted on The Big Shift: August 11, 2009 8:29 AM

"Bye, bye, organization guy." Those words start the first chapter in the estimable Daniel Pink's Free Agent Nation, published in 2007. In that book, Pink observed how increasing numbers of people in the US are choosing to work as independent contractors, temps, and on a project-to-project basis.

Workers were leaving big corporations, Pink said, to get away from "unfulfilling jobs, dysfunctional workplaces, and dead-end careers." As readers of our blog will recognize, we see this dysfunction as the inevitable result of the industrial-era model in which most of today's big companies remain stuck.

In the industrial-era model, companies focus on efficiency above all else—on getting things done at the lowest cost possible. In the name of efficiency they boil their business operations into routinized practices that suppress the creative instincts of their workers, who become standardized parts of a predictable machine. They not only suppress the creative instincts of their workers, they ultimately suppress the individuals themselves. The push-driven programs of these institutions require standardization and predictability. But individuals, especially passionate ones, are ultimately unique and unpredictable.

Small wonder our 2009 Shift Index (PDF) found that only about 20 percent of today's workers are "passionate" about their jobs—defined as loving what they do and working for more than just a paycheck. The Index also found that the most passionate workers were least likely to work for a big corporation.

Which raises a disquieting thought: will big corporations soon be filled only with people too timid to work on their own—the bureaucrats, the clock-watchers, and the resolutely non-talented? Will corporations slowly crumble under their own weight as inertia overwhelms their ability to respond to external events, and their talented people flee to become independent agents?

On the contrary, we believe big institutions will become more relevant than ever—once they focus not just on efficiency but on providing platforms for individuals to systematically experiment, learn, and innovate. As scalable learning replaces scalable efficiency big institutions will become more appealing to talented individuals. In fact, we believe they will become an irresistible magnet for passionate people seeking to amplify their individual efforts to develop faster.

We can think of at least two big reasons why this will occur. First, companies will wake up to the fact that knowledge workers—who exist at every level of the firm—are the ones who monetize intangible assets. Companies that don't nurture them will lose the very workers most responsible for creating profits. That compels big institutions to re-conceive their operations, organization, and strategy through the talent lens, especially as competitive pressures continue to intensify and performance deteriorates—long-term trends documented in our recently released Shift Index. So, corporations increasingly need talented individuals to survive. But why would talented individuals join or remain in large corporations? Why wouldn't they simply strike out on their own and leverage the digital infrastructure to connect with other individuals?

This leads to the second reason we believe that large-scale corporations will remain a prominent feature of our professional landscape: because they will be best positioned to develop and support scalable, long-term, trust-based relationships. Think about it. Even the most accomplished networker supported by social networks like Facebook can develop only a limited number of trust-based relationships. On the other hand, a large institution could scale these kinds of relationships far more rapidly and broadly than any individual could.

Imagine if a well-respected, global firm decided to create the right platform to foster these kinds of relationships, not only among its own employees, but across a worldwide network of diverse external partners. Not only could such a large institution get bigger but—because of the collaboration curve—it would generate increasing returns to scale, accelerating growth for both individuals and the firm. How could any one person, on their own, replicate the scale of relationships such an institution would offer?

Long-term trust based relationships matter because, in the Big Shift era, tacit knowledge is what allows all of us, individually and collectively, to keep up with a fast-moving, unpredictable world. Tacit knowledge, which we all have but experience great difficulty in expressing, is typically created and exchanged only in long-term, trust-based relationships. To access valuable tacit knowledge, in other words, we need scalable networks of relationships, supported by shared practices. Since people can't ever access as many relationships on their own as they could as part of a larger institution, they will face significant disadvantages by remaining independent.

Now, of course, this assumes a dramatic transformation in the institutions that we have today, from institutions that flourish by suppressing individuality to ones where individuality must flourish in order for the institution to do the same. This will not happen overnight. But companies will eventually awake to the opportunity—indeed the imperative—this transition represents. Long-term competitive pressures ensure that the old guard institutions will wither and eventually die if they don't.

From this perspective, we believe the current flight of passionate and talented people from institutional confines represents a transitional event rather than a permanent shift to a "free agent nation" or "e-lance economy." People are fleeing today because our current generation of institutions undermines talent development in the name of efficiency. As a new generation of institutions emerges the current flight from institutions will reverse.

Do you agree with this perspective? Could individuals develop their talent more rapidly on their own than by participating in a new kind of institution completely focused on talent development? What might institutions do to build a distinctive advantage in talent development?
Hagel_brown
John Hagel and John Seely Brown are co-chairman and independent co-chairman, respectively, of Deloitte LLP's Center for Edge Innovation. John Hagel writes a blog at Edge Perspectives. Their monthly column, Innovation on the Edge, explores what executives can learn from innovation emerging on various forms of edges, including the edges of institutions, markets, geographies and generations. Sign up here for an RSS feed.
Lang Davison is the former editor-in-chief of The McKinsey Quarterly and is the executive director of the Deloitte LLP Center for the Edge.

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