Businesses have the tendency to believe that monopoly within companies leads to efficiency. They ruthlessly eliminate any structure that allows users to choose between alternative internal vendors of the same service. But what happen if clients could choose which of lawyers to use? If project teams could choose which software team to employ? If business units could choose which contract for their next product?
Some companies have discover the answer by creating systems that permit choice. We call systems based on internal free markets “free intraprise systems,” for intra-corporate free enterprise systems. The concept is rapidly gaining strength. AT&T, for example, has implemented the idea in its public relations activity. It chartered AT&T PR Creative Services a 30-person group that sells its services in competition and cooperation wit internal PR groups.
“The group started as a small experiment to add a quick, flexible and focused project capability to our organization,” says Marilyn Laurie, AT&T vice president of public relations. “It has enabled us to handle projects critical to our. business, but, more than that, it has us the operating principles for running a successful internal PR agency. Despite unrelenting cost-cutting throughout our business, Creative Services has healthy balance sheet and has grown to meet demand. We’re applying what learned to how we manage and how we work throughout AT&T public relations”
At the same time the dynamics of the internal free market system are coming into play, companies are moving from bureaucratic organizations and toward autonomous teams. The power of teams is not a new concept. In the 1960‚s quality circles in Japan were self-directed study groups at the workshop level. Workers trained themselves in the concepts and techniques of quality control collectively studying the subject and collaborating to solve problems and generate ideas. These collaborations created explosive growth in both quality and productivity.
When autonomous teams operate in an internal free market environment, companies can expect dramatic result. The challenge is to make effective use of the synergy of both elements. Teams must be liberated to challenge the chain of command. In a bureaucracy, the customer is often a remote abstraction. The chain of command, on the other hand, is a real and compelling source of authority that can influence people to listen to the boss rather than the customer. But in a. free intraprise, team energy must be focused on the customer because teams that keep getting work survive. Others disappear. Successful teams continually innovate to serve customers in new ways – and it is the customer, not their bosses, who will decide success or failure.
The internal free market makes sure the diverse activities of autonomous teams add value to customers; otherwise teams don‚t get selected. In a bureaucratic organization, the structure can become so large and complex that it is often hard to measure the performance of individuals, staff groups and teams. Instead of freedom, with natural consequences based on performance as with entrepreneurs, the organization falls back on bureaucratic supervision and evaluation. Yet it is becoming increasingly clear to most managers that teams function effectively only when they have freedom to direct their own work.
Teams that attract work at prices that more than cover their salaries and overhead will need little supervision. To be sure, the company still has a legitimate interest in the safety, environmental cleanliness and diversity of all its operations; but other than these issues, great freedom can be given to teams that earn their living in an internal free market by winning business against all comers.
In a free intraprise network of teams, survival depends on interdependencies with other teams, on the intraprises in the wider organization, and on the ultimate customers of the organization. These teams, with a variety of customers, become a primary way of spreading new procedures and technologies throughout a company. At 3M, for example, each new product team gains much of its success through participation by the wider organization. This is the case in any organization that takes advantage of the benefits of being big.
Unlike the formal roles defined by bureaucracies, team members deal with one another as fellow human beings sharing a common interest in meeting customer needs. They are small enough for efficient, intense involvement and large enough for collective strength and diversity.
In today’s climate of downsizing with its perception of powerlessness, both teamwork and customer focus can falter. Risky behavior – whether voicing the hard truths or doing something new – is often discouraged. Such attitudes can be disastrous. Success today demands courage and ingenuity in managing a flexible intraprise in a fast-moving market. That ability comes from a sense of security and a specific level of responsibility, ownership and accountability – not fear.
No hierarchy of command can sort out issues as complex as those raised by large numbers of teams whose missions cut across one another. That kind of complexity calls for a system that can guide the direction of teams around a common purpose. We believe a free intraprise system, with its emphasis on customer satisfaction, is one of the most ideally structured to tackle this challenge.
The teams of a free intraprise organization create numerous goals and deadlines to meet the promises they voluntarily make to customers. They know their most precious asset is their reputation, and that reputation is best served by keeping commitments, exploring ideas and communicating throughout the whole organization. The effective team will search out what it needs to flourish and dispense with everything else.