07 February 2007

Now and Later - the Future of the Corporation

You go to work inside of a corporation. The corporation's policies are formulated by senior managers. Goals are set for your department for the year. Your department head translates those goals into your goals. It may well be that you and your peers can see a number of problems with the overall plan as it applies to you, but your attempts to point that out are largely ineffectual. You have little control over the direction of the company. You can leave the company if you are unhappy with its direction, but you would have to find a company run differently or start your own, both uncertain prospects.

Meanwhile, you contribute money each year to a pension fund. By this point in your career, your retirement account is worth about $200,000. Collectively, with accounts ranging from about $1,000 to millions, you and your fellow American workers "control" $6 trillion in funds. Although you and your peers own the companies in which you invest, you aren't particularly happy with their policies. The companies' policies seem to most obviously benefit senior managers. You can take your money out of the company, but you would have to find a company run differently. The way tax laws are set up, you cannot shift your investment funds into a company you would start up.

You are pleased that your employer has created jobs in your community. This generally helps. But you also know that these jobs and your potential are not the aim of your company. If and when these jobs can be done for less in places like the Ukraine or Mumbai, they will be. It is not just your community you are concerned for: you are worried about your planet and don't really know what, if anything, your employer is doing about climate change.

What is the quip of Ackoff's? It's like a fly riding an elephant who thinks he is steering the elephant. The elephant doesn't mind and it makes the ride more interesting for the fly. The individual has choices but those choices seem to have little influence over the corporation.

By the year 2020, our concept of corporation will be transformed. It will become a tool for individuals, a real departure from today when the individual is the tool for the corporation.

You go to work inside a corporation. Just as there are inside of a national economy, there are regulations, opportunities, and natural consequences. No one defines your goals. What you do is a product of some intersection of where you see opportunity for making money, what you enjoy doing and what you think would best realize your potential. Opportunities inside of the corporation arise organically. Employees - maybe 1% or maybe 50% - within the corporation act like entrepreneurs, putting forth business plans that capitalize on connections, technology, markets, or capital and know-how within the corporation (and without - the walls of the corporation are porous). Fellow employees vote in two ways - by signing on to an entrepreneurial venture that they see as promising. This takes advantage of two things - widespread expertise and natural markets. (If employees are uninterested in a particular venture, it suggests serious flaws with it - flaws that might never come to light until after the fact in the world of corporate dictatorship.)

The second way in which employees vote is through their pension funds. Employees have the opportunity to invest in ventures at the ground-floor level, helping to fund their own projects or the projects of fellow employees. Employee money could be invested in company stock or in the startups underway within the company. This, too, would be a market signal about where experts familiar with the market, technology, and people involved thought it best to direct resources.

The community would benefit as well. Policies organically emerge from the actions of dozens, hundreds, or thousands of employees. They are no longer top-down directed. People making policy rarely choose to put the smoke stacks upwind from their houses and the more that policies arise from the actions of more individuals, the less likely corporations are to pursue policies that degrade the environment of people "over there." The dispersion of power within the corporation will make "over there" effectively disappear. Such employees are unlikely to adopt policies that shift their jobs overseas. They will be at least as interested in opportunities that allow them to realize their own potential as they are in opportunities that maximize .... what is it, exactly, that current corporate policies maximize?

Dispersing power within the organization is not just idealistic. It acknowledges current reality. And the current reality is that expertise, information, and control of capital is already dispersed. Changing how corporations are managed to align with this new reality only makes sense.

Finally, the dispersion of power within the corporation will help us to overcome the new limit to development. No longer does land, capital, or even knowledge work limit progress. We are, today, limited by entrepreneurship. Just as the last century popularized knowledge work, so will entrepreneurship be popuarlized in this century. That is the topic for another posting.


Vladimir Dzhuvinov said...

Interesting stuff, particularly the connection between the corporation and the pension funds :)

David said...

You know as well as I that today's corporations are not repositories of entrenpreneurs among most employees. Participatory management has been tried and failed. I see virtual corporations among those possessing entrenpreneurial skills perhaps but I'm less sure about what happens to the "worker bees." So, we're back to education. Extend your target date by about 70 years optimistically.

Ron Davison said...

My deadline is 2050 - I want to see this happen by the time I'm 90. But seriously, you know that corporations do have a percentage of entrepreneurial folks. Imagine guys (hypothetically) named Patrick Simpson or Bill Bertch having the opportunity to create a new business or product line and in the proces have more autonomy and have the chance to get a big boost to their net worth.

Vladimir Dzhuvinov said...

70 years? 2050?

Come on guys, you're such pessimists :)