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The 21st Century Organization

According to Drucker (1998) “now we are entering a third period of change: the shift from the command-and-control organization, the organization of departments and divisions, to the information based organization, the organization of knowledge specialists” (p 18-19). This third period contrasts greatly from the previous two periods identified by Drucker as being a) the shift to management as being differentiated from ownership and b) the introduction of decentralized command-and-control structures. What characterizes this period of change is the use of data for the purposes of creating policy rather than control decisions.

Control, in a post-modern organization, moves away from universality and more towards elements of deconstruction. Correspondingly, data, which previously was used to reinforce universal or centralized control, now is spread across a wider field within the organization. The advent of computers, data storage and retrieval, and more accessible methods of access to the information produced allow such dispersion of information in ways previously not realistically available due to factors of time and cost.

The 21st organization then must adapt itself not simply to new markets, products, and services but also new social constructions of reality (Anderson, 1990). Organizations, as social structures (Scott, 2003, p. 24), are subject to the collective ideology of the people of whom it is comprised. More to the point, the status quo from traditional and modern ideology is increasingly becoming challenged as greater numbers of social groups begin to challenge the legitimization of authority around them. We can clearly see this in the fall of the Berlin Wall, the decline of communism, the institution of social reforms in China, and most recently in the backlash against the attempted assassination of Ukraine Presidential hopeful Viktor Yushchenko (Times Online, 2004).

With the increase in post-modern ideology becoming prevalent on a global scale, closed rational systems of governance are being pressured to conform. Several authors suggest a myriad of ways in which the 21st century organization may rise or fall however in the any open-systems approach, there is rarely one specific method that is all encompassing. Attached then is a short listing of 12 key characteristics that may serve to help define what the 21st century organization is going to look like 20 years from now.

  1. Borderless (Ohmae, 2000)
  2. Learning centric (Garvin, 2000)
  3. Collaborative (Hamel, Doz, & Prahalad, 2000)
  4. Knowledge-Creating (Nonaka & Nishiguchi, 2001)
  5. Strategically outsourced (Quinn & Hilmer, 1998)
  6. Geocentric (Perlmutter, 2000)
  7. Ethical (Romar, 2004)
  8. Networked (Quinn, Anderson, & Finkelstein, 1998)
  9. Loosely coupled (Scott, 2003)
  10. Self maintainable (Scott, 2003)
  11. Contingency based (Bass, 1990; Scott, 2003)
  12. Fostering an environment of high care (Ba) (Nonaka & Nishiguchi, 2001)

At the core will be a firm’s ability to respond to hypercompetition. Quinn, Anderson, & Finkelstein (1998) note that the “hypercompetition concept is that the only enduring advantage results from the ability to generate new advantages: for example, while no cost or quality advantage is sustainable, the skill of generating new cost and quality advantages is sustainable” (p. 162). Each of these core characteristics must then develop as a response to either opportunities or threats in an organization’s ability to leverage one of more of these characteristics and to its competitive advantage.

This doesn’t mean that the essences of the bureaucracy will disappear. In fact, according to Drucker (Romar, 2004) the development of large-scale formal organizations will likely continue to be a centerpiece of the organization into the 21st century. The focus however will continue to move further away from command-and-control to more social based organizations and therefore to more open systems / network based firms. As Drucker notes, “the essence of the corporation is social, that is human, organization (. . . .) it is not based on raw materials or gadgets but on principles of organization – organization not of machines but of human beings, i.e., on social organization” (Drucker, 1983, p. 31).

This process can already be seen taking effect in companies such as IBM that are using a values based, i.e. a social paradigm, approach to reorganizing the multinational firm (Hemp & Stewart, 2004). IBM provides a good example of the switch in paradigm from command-and-control to information-based management and how it can work effectively for IBM, its customers, staff, and shareholders. Despite holding a $100M liability in establishing a post-modern trust relationship with its managers, IBM has managed to gain support for its direction and will likely serve as a model for other large corporations to follow as IBM continues to develop new competitive advantages.

Kevin Feenan
Managing Director
Knomaze Corporation

References

Anderson, W.T. (1992). Reality isn’t what it used to be. San Francisco: Harper and Row.

Bass, M. B. (1990). Bass & Stogdill’s Handbook of Leadership: Theory, Research and Managerial Applications. (3rd ed). New York: The Free Press.

Drucker, P.F. (1983). Concept of the Corporation. New York: New American Library.

Drucker, P.F. (1998). The coming of the new organization. In Harvard business review on knowledge management (pp. 1-19). Boston: Harvard Business School Press.

Garvin, D.A. (2000). Building a Learning Organization. In C.A. Bartlett & S. Ghoshal (Eds) Transnational Management – Text, Casis, and Readings in Cross-Border Management 3rd Edition. (pp. 690-703). Boston: Irwin McGraw-Hill.

Hamel, G., Doz, Y.L., & Prahalad, C.K. (2000). Collaborate with your competitors – and win. In C.A. Bartlett & S. Ghoshal (Eds) Transnational Management – Text, Casis, and Readings in Cross-Border Management 3rd Edition. (pp. 495-502). Boston: Irwin McGraw-Hill.

Hemp, P. & Stewart, T.A.. (2004). Leading Change When Business Is Good: An Interview with Samuel J. Palmisano. Harvard business review. December 2004. Retrieved on December 12, 2004 from http://harvardbusinessonline.hbsp.harvard.edu/b01/en/hbr/hbrsa/current/0412/article/R0412C.jhtml

Nonaka, I., & Nishiguchi, T. (Eds.). (2001). Knowledge emergence: Social, technical, and evolutionary dimensions of knowledge creation. Oxford: Oxford University Press.

Ohmae, K. (2000). Managing in a borderless world. In C.A. Bartlett & S. Ghoshal (Eds) Transnational Management – Text, Casis, and Readings in Cross-Border Management 3rd Edition. (pp. 83-92). Boston: Irwin McGraw-Hill.

Perlmutter, H.V. (2000). The tortuous evolution of the multinational corporation. In C.A. Bartlett & S. Ghoshal (Eds) Transnational Management – Text, Casis, and Readings in Cross-Border Management 3rd Edition. (pp. 73-82). Boston: Irwin McGraw-Hill.

Quinn, J.B., & Hilmer, F.G. (1998) Core Competencies and Strategic Outsourcing. In H. Mintzberg & J.B. Quinn (Eds), Readings in the strategic process (pp. 63-73). Upper Saddle River, NJ: Prentice Hall.

Quinn, J.B., Anderson, P. & Finkelstein, S. (1998) New Forms of Organizing. In H. Mintzberg & J.B. Quinn (Eds), Readings in the strategic process (pp. 162-174). Upper Saddle River, NJ: Prentice Hall.

Romar, E.J. (2004). Managerial Harmony: The Confucian Ethics of Peter F. Drucker. Journal of Business Ethics, 51(2), 199-210. Retrieved December 20, 2004 from ABI/INFORM Global database. (Document ID: 679245441).

Scott, W. R. (2003). Organizations: Rational, natural, and open systems (5th ed.). Upper Saddle River, NJ: Prentice Hall.

Times Online. (2004). Who Poisoned Yushchenko? Retrieved on December 20, 2004 from http://www.timesonline.co.uk/article/0,,3-1393172,00.html

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