Life and Work in 2010
Qualityworld, October 2002
There are currently three times as many public relations consultants as coal miners. More people now work in Indian restaurants than in shipbuilding, steel manufacturing and coal-mining combined. Over the past 20 years the British economy has undergone a major transformation. Richard Scase, author, academic and entrepreneur, looks at the future of life and work in Britain.
The revolution in information and communication technologies is restructuring the global economy. These forces of change are affecting the functioning of national economies, the role of governments and the way in which we work and live. The products we use in our everyday lives, and the tools and skills that we employ in our jobs are all affected by the direct and indirect processes of the technological revolution and globalisation.
We drive automobiles designed in Europe and manufactured in South East Asia by companies that are US-owned. Economic cycles are no longer confined to national economies. Regional trade blocs, the operation of currency markets and the world's stock markets have created global interdependencies between countries. The skills we need to succeed and survive in this corporate zoo are equally affected by these global trends. The explosion in information and communication technologies, the revolution in transportation systems and the standardisation of business practice have brought about a shift of the world's manufacturing base to southern China and South East Asia. Our leisure and recreation activities are equally affected: the tools and equipment that we use are likely to be manufactured in the Far East and the barbeques, the garden furniture and the flowerpots on our patios will be made somewhere in China.
Globalisation and the reinvented business
Globalisation is also shaping the nature of our personal relationships. Developments in the world economy over the past 50 years have generated large-scale migration between countries. The result is that within families, we have kin whose personal heritage is steeped in other cultures. Globalisation has created, strangely enough, greater individuality and cultural diversity. The paradox is that as we become more similar, we also become more different from each other. The interconnected world is changing the nature of business transactions. This change is both in terms of internal business operations and in their relations with others in ever-changing markets. Customer relations and business partnerships between manufacturers, suppliers and retailers are being re-engineered through the capabilities of internet technologies.
These technologies allow suppliers, manufacturers and retailers to collaborate in the development of innovative products and services. They allow for cost-effective inventory management among retailers as well as for less production systems for manufacturers. The same technologies are creating greater opportunities for small entrepreneurial ventures. The Internet allows small firms to participate in global supply chain delivery of products and services to larger corporations.
Software design companies in remote locations in the South Pacif1c can function as service providers to large corporations in the northern hemisphere. At the same time, the potential for corporate exploitation becomes more acute. Enterprise zones created in South East Asia can function as fronts for the use of underage labour and for the payment of excessively low wages to women and other vulnerable groups, protected by neither state regimes nor trade unionism.
Major companies can maintain a one-step distance from such conditions through the use of local subcontractors and other service providers. It is fast becoming the responsibility of consumers, investigative journalists and international agencies to uncover exploitative employment conditions. Once exposed, this knowledge is rapidly transmitted on a global basis, often doing irreparable damage to what were once regarded as respectable, socially responsible corporate brands.
In-house or out?
The internet gives companies the ability to coordinate diverse activities through shared information systems and data processing. It allows companies to further reduce costs and enables them to concentrate upon their core skills as manufacturers, suppliers and retailers. The internet makes for collaborative relations between companies so that information can be shared for product development, inventory management and lean delivery systems. The outcome is the emergence of business networks consisting of companies in strategic alliances and joint ventures with each other, with the outsourcing of non-strategic, core activities to business partners and various franchising and licensing arrangements. It is the restructuring of business transactions, on the basis of long-term strategic partnerships, that creates opportunities for many entrepreneurial ventures.
The outsourcing of corporate activities has allowed specialist service providers to establish themselves. Dublin is a good example of where investment by hightech companies has created an entrepreneurial culture where start ups have flourished, focused upon localising software products for different European markets.
The corporate giants
How can the corporate giants respond to the challenges of the wired world? Market harriers are breaking down with deregulation and the lowering of tariffs within different regionally-based trading blocs. Competitive pressures are more apparent as accountancy practices and business standards are harmonised on a global basis. ISO 9001 and similar benchmarks encourage companies to develop global cultures in their internal and external trading practices. Markets are also changing as both customer and consumers are able to exercise greater purchasing choices from a far broader range of service providers. In this interconnected world, corporate giants are not only in competition with each other but they are often competing with local based, entrepreneurial ventures. The great corporations of the world may dominate global supply chains but this does not prevent them from being threatened by more adaptive, local operators.
The global corporation of the past was highly centralised in both its strategic and operative processes. The result was a corporation where R&D, production, marketing and selling strategies were all concentrated at corporate headquarters. In 2010, the multinational company will be structured to entirely opposite principles. It will be highly decentralised with the corporate centre operating as little more than a treasury with two major purposes. The first, to approve the business plans of each of the separate operating units that make up the conglomerate. The second, to make acquisitions and divestments. Otherwise, the majority of strategic and operational responsibilities are devolved to each of the separate operating units. This was very much the business model of General Motors, Unilever and Hewlett-Packard until the early 1990s. Each business unit operated in a separate national or regional market with its own brand. For General Motors, it was Vauxhall in the UK and Opel in Germany. This is still the case. But in the past there would be separate and distinct R&D, manufacturing, marketing and selling functions attached to each of these business units. The outcome of these decentralised structures was a high level of customer focus and very market-responsible R&D activity. However, the downside was high duplication of overheads as the units more or less replicated each other.
Both the global and multinational business models are now superseded by the transnational corporation. This has been enabled by the growth of intranet and internet technologies. In the transnational corporation, cross-unit and integrated strategic decision-making processes are at the very core of the operation. Transnational companies operate through coordinating the strategic and operational activities that have devolved to each of the separate business units. These companies are both highly centralised and decentralised. Internet technologies allow for the transnational corporation to function as both a global and multinational corporation at the same time. Through the coordination of decentralised strategic and operational activities, corporate resources on a worldwide basis can be leveraged to deliver goods and services as required by the peculiarities of local markets.
Transnational corporations are global giants but they function as local entrepreneurial fleas. This is creating new business challenges. How do they schedule and prioritise activities between their separate operating units? In the global corporation, the operating culture is imposed from the headquarters of the home county. In the multinational, each unit operates autonomously with its own cultural practices. But in the transnational corporation operating processes are structured around global coordination.
Managing cultural diversity across operating units takes precedence. It is this that shapes the design of effective business practices and with it, the use of internet technologies. The challenges for the transnational corporation are those associated with cultural coordination and harmonisation of operating practices. Without success in these spheres, no effective information system can be implemented and corporations fail in their attempts to be customer-focused entrepreneurial fleas in highly diverse, local markets.
The redefinition of personal success
In the certain world of corporate bureaucratic structures, it was quite easy to measure personal success. Ideas of personal achievement were directly related to positions in organisational hierarchies. These were clearly graded in terms of prestige, pay and fringe benefits. Related to jobs were size of salary, size of office and allocation of parking space. These somewhat crude job distinctions were further reinforced by preoccupations with detailed status differences. These could range from quality of carpet on the office floor through to access to catering facilities and corporate hospitality allowance.
But organisational realities are rapidly changing. Even in public sector organisations, most renowned for their rigid hierarchical structures, the break-up of traditional structures is underway. The sweeping away of bureaucratic structures is being driven by developments in information technology, demanding customer and citizen expectations, and the changing aspirations of employees. Consumers expect their needs to be met in personalised ways rather than being treated as an undifferentiated mass. Employees resent being treated as dispensable cogs in bureaucratic machines. Today, large companies - the corporate elephants - do everything within their capabilities to behave as entrepreneurial fleas. Small is seen as beautiful and the message to large corporations is to flatten their structures, decentralise their operational and strategic responsibilities and empower line managers to behave as though they are entrepreneurs running their own businesses.
This has destroyed the underlying mechanisms for motivating corporate managers. In the past, corporate careers were structured in terms of an overriding dream. A dream that was organised around promotion, competing against others and climbing up corporate hierarchies. These stable and predictable careers had broader social ramifications. It produced the western world's middle classes who occupied the suburbs and the affluent neighbourhoods of the post-war decades. They viewed their futures with optimism as they competed in the corporate race for promotion. With corporate restructuring and the adoption of the entrepreneurial paradigm, these features of corporate life have been confined to the dustbins of the past.
The outcome is that criteria for personal success are no longer predictable and transparent. A successful career route enjoyed by a 35-year-old male or female high-flyer can suddenly be dissipated by a corporate merger or acquisition. In this world, work employees develop short-term instrumental attitudes toward their employing organisations. They have to Personal success in this uncertain world becomes measured not in terms of careers - that is, not as upward mobility with hierarchical structures - but in terms of material, financial rewards that support material living standards and personal lifestyles for today. Instead of a focus upon present-day sacrifice for corporate rewards in the future, the emphasis is exclusively upon the today. This attitude leads to high rates of personnel mobility between companies as employees develop transferable skills that allow them to unlock themselves from the clutches of their present employers.
But personal success in the corporate zoo demands intensity of personal commitment. Corporations expect their staff to work wholeheartedly for them but without the offer of traditional rewards. Short-term commitment has superseded long-term loyalty as the basis for the psychological contract between employers and employees. This is the corporate aim.
Brains are not enough
For competitive advantage in the knowledge economy, corporations need continuous innovation. The global marketplace forces them to reinvent their product portfolios on an ongoing basis. This puts human creativity at the strategic core of the business. Without this, the most sophisticated information systems and internet technologies will fail to deliver competitive advantage. The employment conditions that encourage internalised commitment are fairly atypical. They are found in business start-ups and other entrepreneurial ventures. Small firms are more conducive to generating this than larger companies.
Californian high-tech business and US companies in general seem more capable of generating internalised commitment than European companies, steeped as they are in industrial traditions that generate low trust, employer-employee suspicion and resentful compliance. Internalised commitment, the key to high performance, is likely to lead to innovation, the exploitation and development of new ideas, low costs through a reduced need for supervision, management and detailed job descriptions. The innovative, flexible firm is the outcome of internalised commitment. The challenge for corporate leaders is to create the appropriate conditions for this. The two-day off-site culture building activity is unlikely to bear much fruit. It requires heavy investment in employee training and personal professional development.
Essentially, US and British companies are structured on the principles of project management. In the 1980s, companies were downsized, with tiers of management eliminated. In the 1990s, management fashion embraced the ideas of business process reengineering so that organisations were broken down into customer-focused trading units. Sometimes these were established as subsidiary companies while in other cases they were set up as profit-making trading units, profit and loss, and cost centres. All of this established a management culture that is entrepreneurial and focuses almost entirely on the short term. It also created highly segmented organisational structures since the incentives and rewards that employees gain are entirely related to the activities of their own particular operating units.
What is self-evident is that we are in a period of fundamental change. The institutions, social structures and lifestyles of the old industrial order are breaking down, but there are uncertainties as to what is replacing them. New contradictions are emerging, such as the appeal of both globalisation and localism. Forces of convergence are shaping the social structures of different societies while there are also pressures that are reinforcing national, regional and local differences. Britain is a society transforming itself from an industrial into a knowledge-based economy.
But in the information age, work and employment will still be the pivotal axis around which institutions and lifestyles will be structured, and how governments and other institutions regulate them. For the past decade Britain has chosen to admire and imitate the US way of doing things; that is an unfettered market economy which sustains a high level of economic productivity but at a high price in terms of inequalities and social exclusion. Behind a facade of Hollywood-generated excitement, it is a society-stifling suburban conformity with an obsession of self, appearance and banal celebrity. Is this the kind of society Britain wants to be in the future? Or should we look to European countries, which are embracing the challenges of the information age, but with perspective, social inclusion and quality of life as the end game?
© Professor Richard Scase