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POSTMODERN MANAGEMENT

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					POSTMODERN MANAGEMENT
The Emerging Partnership Between
Employees and Stockholders
By
William McDonald Wallace




                                   1
           PROLOGUE

• NEW SCIENCES SHIFT
  WORLDVIEWS FROM MODERN TO
  POSTMODERN
 • QUANTUM MECHANICS (1900-1927)
 • CHAOS (COMPLEXITY) THEORY and
 • SELF ORGANIZATION (AUTOPOIESIS)
   in the 1970s
 • PUNCTUATED EQUILIBRIUM (1970s)


                                     2
          THE SHIFT TO
          POSTMODERN
• FROM MECHANISTIC DETERMINISM
  TO OPEN CONTINGENCY
• FROM A CLOCK WORK UNIVERSE
  TO A PARTICIPATORY UNIVERSE
• FROM PHYSICAL TO RELATIONAL
  REALITY
• FROM CONTINUOUS EVOLUTION TO
  PUNCTUATED EQUILIBRIUM

                                 3
IMPLICATIONS FOR BUSINESS STRATEGY AND
                POLICY
 • FROM MECHANISTIC TO ORGANIC
   POLICY FORMAT FOR BUSINESS
   ENTERPRISES
 • EMPHASIS SHIFTS FROM STARS TO
   TEAMS; FROM INDIVIDUALISM TO TEAM
   SPIRIT AND ESPRIT DE CORPS
 • FROM FORCASTING THE FUTURE TO
   FLEXIBLE RESPONSES TO SURPRISE
 • FROM TOP DOWN TO BOTTOM UP
   MANAGEMENT

                                         4
    THE SHIFT IN EVOLUTION

• STEVEN J. GOULD MODIFIES DARWIN
  FROM A CONTINUOUS TO
  DISCONTINOUS PROCESS GOULD
  CALLED PUNCTUATED EQUILIBRIUM TO
  FIT THE EVIDENCE
• CULTURAL (AND ECONOMIC)
  EVOLUTION FITS INTO THIS NEW VIEW
  OF PROCESS
• NEW TECHNOLOGY CHANGES CULTURE
  MUCH LIKE MUTATIONS IN DNA CHANGE
  OUR ANATOMY

                                      5
PROCESS OF PUNCTUATED EQUILIBRIUM

• ECOSYSTEMS SELF-ORGANIZE INTO
  STABLE EQUILIBRIUM (STASIS)
• STASIS IS THE “NORMAL” STATE WHEN
  LITTLE CHANGE OCCURS
• SERIOUS DISRUPTIONS UPSET STASIS
• TRIGGERING THE “PUNCTUATION”
  PHASE OF ACTUAL EVOLUTION
• RECOVERY FROM DISRUPTION “AIMS”
  TO RESTORE STASIS (SELF ORGANIZED)


                                       6
 THE CHANGE PROCESS CYCLE (F.R.O.C.A)

• DISRUPTIONS CREATE CHAOS THAT
  CREATE NEW FRONTIERS (F) OF RISK
  AND OPPORTUNITY
• CHAOS OFFERS RELEASE (R) FROM
  PRIOR ECOLOGICAL CONSTRAINTS
  LEADING TO
• OVEREXPLOITATION (O) FOLLOWED BY
• AN (OFTEN TRAUMATIC) CRASH (C)
• FOLLOWED BY ADAPTATION (A)TO A
  NEW SET OF CONSTRAINTS ENDING IN
  STASIS
                                        7
EXAMPLES OF PAST FRONTIERS OF CHANGE

• UNKNOWN DISRUPTION TRIGGERS
  MULTI-CELLED ORGANISMS 600 mya
• POSSIBLE ASTEROID HIT GIVES RISE TO
  DINOSAURS 200 mya
• YUCATAN ASTEROID HIT WIPES OUT
  DINOSAURS, EVOLVES MAMMALS 65
  mya
• CLIMATE DISRUPTIONS EVOLVES
  PRIMATES, HOMINIDS, AND HUMANS
  FROM 6 mya to about 30,000 years ago


                                         8
  HUMAN ANATOMICAL AND CULTURAL
          CO-EVOLUTION
• THE “RISEN APE” 6 mya (drought)
• THE SMARTER APE (HOMINID) 2
  mya
• EARLY HUMANS (about 1 mya)
• MIDDLE HUMANS (.5 mya)
• MODERN HUMANS (HOMO
  SAPIENS)
  about 40,000 years ago and all within
  the context of a stone age
  technostructure                         9
      CULTURAL EVOLUTION
• 30, 000 YEARS AGO TO DATE
• CULTURAL EVOLUTION PRE-EMPTS
  ANATOMICAL
• INVENTED TECHNOLOGY DRIVES
  CULTURAL CHANGE MUCH AS
  MUTATIONS TO DNA DRIVE
  ANATOMICAL CHANGE.
• THE TECHNO-STRUCTURE IS TO
  CULTURE AS DNA IS TO OUR ANATOMY



                                     10
    HUNTER-GATHERER STAGE
• ALL EARLY HUMAN CULTURES HAD
  A SIMILAR NEOLITHIC
  TECHNOLOGY
• DIVERSITY WAS DRIVEN MAINLY BY
  CLIMATE AND GEOGRAPHY
• BY THE END OF THE LAST ICE AGE
  HUMANS HAD BEGUN TO OVER-
  EXPLOIT THE GAME

                                   11
     SHIFT TO AGRICULTURE

• FROM NOMADIC GATHERING TO
  SETTLED FARMING BRINGS ABOUT
  A NEW WAY OF LIFE.
• FROM 20 SQ. KM TO FEED EACH
  PERSON FARMING NEEDS ONLY AN
  ACRE OR TWO.
• HUMAN BIRTH RATES RISE
• POPULATION BEGINS TOEXPLODE

                                 12
       NEW TECHNOLOGY
• METAL TOOLS BEGIN TO REPLACE
  STONE TOOLS
• ANIMALS DOMESTICATED
• WHEELS (AND CARTS) INVENTED
• WRITING BEGINS TO EMERGE
• GOVERNMENT AND ORGANIXZED
  RELIGION EMERGE


                                 13
            CHAPTER ONE
      THE RISE OF BUREAUCRACY
• HUGE INCREASE IN PRODUCTION
  OF FOOD LEAD TO
• HUGE INCREASES IN POPULATION
  LEAD TO THE DIVISION OF LABOR
• RESULTING IN CIVILIZATION BASED
  ON CITIES



                                    14
    HYDRAULIC AGRICULTURE
• NEED FOR LARGE IRRIGATION
  NETWORKS
• DOMINANCE RESURGES FROM
  DORMANT PRIMATE PAST
• BUREAUCRACY, DESPOTIC GOVT.
  AND ORGANIZED RELIGION ALL
  ARISE BY EARLY CIVILIZATION



                                15
EGALITARIAN SOCIETY REPLACED BY DESPOTISM
  • LARGE POPULATIONS
    OVERWHELM EGALITARIAN
    KINSHIP GROUPS
  • ANARCHY EMERGES WITHIN
    TRIBES AS FAMILIES AND CLANS
    BEGIN TO BATTLE EACH OTHER
  • PEOPLE CREATE AUTHORITY TO
    BRING ABOUT ORDER


                                            16
    EVOLUTION OF DESPOTISM
• HEAD MEN ELECTED TO SETTLE
  ARGUMENTS
• THEN WEAK CHIEFS EMERGE
• STRONG CHIEFS EMERGE
• CHIETAINS EMERGE
• KINGS AND GOD KINGS EMERGE,
  ALL DRIVEN BY RISING
  POPULATION

                                17
    SOCIAL STRATIFICATION
• AS POPULATION RISES CHIEFS
  BECOME MORE POWERFUL AND
  REQUIRE MORE DIVISION OF
  LABOR
• TAXES AND TRIBUTE NEEDED TO
  FINANCE PUBLIC WORKS
• WAR CAPTIVES BECOME SLAVES
• ALL ANCIENT CULTURES SLAVE-
  BASED WITH MINOR EXCEPTIONS


                                18
     RISE OF CASTE SYSTEMS
• TO RANK OCCUPATIONS OR JOBS
  IN ORDER OF SOCIAL WORTH
  CREATES A CASTE SYSTEM.
• EARLY PRIESTHOODS CREATED
  FIRST CASTE SYSTEMS AND THEY
  DOMINATED THE ANCIENT WORLD
• USEFUL WORK USUALLY RANKED
  IN THE LOWEST CASTE


                                 19
      CASTE AND INNOVATION

• CASTE SYSTEMS AND SLAVERY SERVED
  TO RETARD NEW TECHNOLOGY IN MOST
  OF THE ANCIENT WORLD
• SLAVES DID MOST OF THE WORK. THUS,
• THOSE BEST PLACED TO INNOVATE HAD
  NO SOCIAL STATUS
• INTELLEGENTSIA AVOIDED PHYSICAL
  WORK TO AVOID BEING TAINTED BY IT



                                       20
    INNOVATION SUPPRESSED
• FROM ABOUT 4,000 BCE TO ABOUT
  1200 CE, LITTLE INNOVATION OR
  ECONOMIC GROWTH OCCURRED
• STANDARDS OF LIVING REMAINED
  CONSTANT AND GOVERNMENTS
  WERE MOSTLY KLEPTOCRATIC




                                  21
    EFFECT OF CHRISTIANITY
• CHRISTIAN THEOLOGY RAISED
  MORAL QUESTIONS ABOUT CASTE
  AND SLAVERY
• EVEN SLAVES EQUAL IN THE EYES
  OF GOD
• NEW TESTAMENT PLACES WEALTH
  UNDER A MORAL CLOUD



                                  22
ROME COLLAPSES AS CHRISTIANITY THRIVES
• EMPIRES EMERGED TO BRING LAW AND
  ORDER TO BORDER REGIONS AND
  QUELL ANARCHY
• ROME OVER-EXPANDED AND COULD
  NOT SUSTAIN THEIR LEGIONS
• BARBARIANS BEGAN TO WIN AND
  SLAVE SUPPLY DRIVES UP
• ROMES WEAKENS AND THEN
  COLLAPSES IN 476 CE



                                         23
FROCA TRIGGERED BY ROME’S COLLAPSE INTO
                CHAOS
• LOSS OF ROMAN AUTHORITY
  PROVIDED ECOLOGICAL RELEASE
  FOR CRAFTSMEN-INNOVATORS
• EUROPE DECENTRALIZED AND A
  SURGE OF INNOVATION FOLLOWS
• WATCHES, ARTILLERY, PRINTING
  PRESSES, COMPASS, SQUARE
  RIGGED SHIPS, AND MUCH ELSE


                                          24
     PROTESTANT REFORMATION
• PRINTING ENERGIZES THE PROTESTANT
  REFORMATION
• CALVINISM RESTORES THE DIGNITY OF
  USEFUL WORK AND RESTORES
• THE MORALITY OF WEALTH THUS
• FOSTERING EARLY CAPITALISM IN
  CONJUNCTION WITH THE ADVANCING
  TECHNOLOGY TO CREATE THE
  INDUSTRIAL REVOLUTION



                                      25
BUREAUCRACY AND “RATIONAL” CASTE
• WORKERS HIRED TO DO SPECIFIC JOBS
  PRICED AT SPECIFIC RATES
• EQUITY PRINCIPLE STATES EQUAL PAY
  FOR EQUAL WORK, MORE PAY FOR
  IMPORTANT WORK, ETC.
• PAY DIFFERENTIALS = STATUS
  DIFFERENTIALS = CASTE
• JOB EVALUATION MAKES IT “RATIONAL”



                                       26
        DIVISION OF LABOR

• FAMOUS PIN FACTORY EXAMPLE
• DIVISION OF LABOR DOES IN FACT
  INCREASE PRODUCTIVITY
• THEORY OF “RATIONAL”
  ECONOMIC MAN AS PURE
  INDIVIDUALIST
• NO THOUGHT OF ESPRIT DE CORPS
  OR LOYALTY

                                   27
COMMODITY THEORY OF LABOR AND
        ENCLOSURE
• ENCLOSURE CREATES ROOTLESS,
  DEMORALIZED RURAL REFUGEES
• FIRST INDUSTRIAL PROLETARIAT
• HIGH RATES OF
  CRIME,ALCOHOLISM
• LABOR SCORNED AND
  DISTRUSTED
• COMMODITY THEORY OF LABOR A
  NATURAL OUTCOME OF
  ENCLOSURE                      28
COMPETITION AND MARKET THEORY
• INVISIBLE HAND OF COMPETITION
  REGULATES FREE MARKET
• BRITAIN IGNORES THE NEED FOR
  INTERNAL COOPERATION
• JAPAN REJECTS THE COMMODITY
  THEORY OF LABOR AS IMMORAL
• “COMPETITION BETWEEN FIRMS,
  COOPERATION WITHIN THEM”


                                  29
   CHAPTER TWO
MODERN BUREAUCRACY




                     30
     BUYER-SELLER RELATIONSHIP
• WORKS WELL FOR CONTRACT WORK
• WORKS POORLY FOR PERMANENT
  STAFF BECAUSE IT ENCOURAGES
 •   JOB DEFENSIVENESS INCLUDING
 •   POWER STUGGLES
 •   EMPIRE BUILDING
 •   RESISTANCE TO CHANGE
 •   SUB-OPTIMIZATION AROUND JOBS AND
     DEPARTMENTS INSTEAD OF THE WHOLE




                                        31
       OTHER DYSFUNCTIONS
• OVERSTAFFING
  • ESPECIALLY IN MANAGEMENT
• OVERLAYERING
  • EXCESS LINKS IN CHAIN OF COMMAND
• OVER-REGULATION (RED TAPE)
  • RULES PASS BEYOND THE REALM OF
    DIMINISHING RETURNS AND HAMSTRING
    OPERATIONS
• THESE PROBLEMS ARE CROSS
  CULTURAL

                                        32
      STATUS IMPERATIVE
• PEOPLE REFLEXIVELY DEFEND
  THEIR ORGANIZATIONAL IDENTITY
  AND STATUS IN THE SHORT RUN

• PEOPLE STRIVE TO INCREASE
  THEIR STATUS AS THEY GAIN
  EXPERIENCE IN THE LONGER RUN.



                                  33
  AUTOPOIESIS APPLIES TO ALL LIFE
• DEFINED AS SELF REFERENCE OR SELF
  CREATING; PROTECTING THE
  INTEGRITY OF IDENTITY APPLIES TO ALL
  LIFE
• AUTOPOIESIS ALSO ENERGIZES SELF
  ORGANIZATION AND ALSO HELPS
• TO RESTORE THE COMMUNITY AFTER
  MAJOR DISASTERS
• BODY’S ABILITY TO HEAL WOUNDS
  ALSO DRIVEN BY AUTOPOIESIS


                                         34
        AUTOPOIESIS AND LOYALTY
• PRIMARY IDENTITIES DETERMINE MAIN
  LOYALTIES GREATER THAN SELF
  •   FAMILY
  •   CLAN
  •   TRIBE
  •   NATION
  •   RELIGION
  •   IDEOLOGY
  •   ORGANIZATION
  •   JOB OR PROFESSION



                                      35
     AUTOPOIESIS AND FROCA

• FRONTIER SOCIETY



• TRADITIONAL SOCIETY




                             36
 CHAPTER THREE
THE AUTOPOIESIS OF
   JOB DEFENSE




                     37
SOCIAL RELATIONSHIPS AS REALITY
• SOCIAL RELATIONSHIPS CREATE
  SOCIAL REALITIES
• DIFFERENT RELATIONSHIPS TEND
  TO INDUCE DIFFERENT BEHAVIORS
• PAYING THE JOB, NOT THE
  PERSON, ASSURES JOB
  DEFENSIVENESS
• JOB COMBINES IDENTITY, STATUS,
  AND ROLE.

                                   38
        RULES AS RED TAPE
• RED TAPE SERVES AS MAKE WORK
• OFTEN SERVES TO ELICIT BRIBES
• APPLY THE LETTER OR THE SPIRIT OF
  THE LAW (OR RULE)?
• PLATO’S PRINCIPLE
• JUDEO CHRISTIAN EXAMPLE
• “ITS MY JOB”
• KNOWING WHEN TO STOP IN MEDICINE


                                      39
CHAIN OF COMMAND VS. PROMOTION LADDER

  • CHAIN OF COMMAND NEEDS TO BE
    SHORT
  • PROMOTION LADDER NEEDS TO BE
    LONG
  • HOW TO CREATE MORE LAYERS TO ADD
    RUNGS TO THE PROMOTION LADDER
  • WHY MAIN FRAME COMPUTERS ADDED
    JOBS INSTEAD OF WIPING THEM OUT


                                       40
   INNOVATION VS BUREAUCRACY

• USSR AND COLLAPSE OF SOVIETS
• LAYERS VS. PROBABILITY OF
  APPROVAL
• NOT INVENTED HERE SYNDROME
• BUREAUCRACY AFTER STABILLITY
  NOT INNOVATION OR CHANGE



                                 41
  CHAPTER FOUR
MANAGEMENT SCIENCE
       AND
      FPCC



                     42
       THE SLOAN MODEL
• ALFRED SLOAN AND THE MAKING
  OF GMC
• DIVISIONAL GROUPING OR
  FEDERAL DECENTRALIZATION
• FINANCE THE CONTROL FUNCTION
• ENTER ROBERT MCNAMARA




                                 43
FORECASTING, PLANNING, COMMAND AND
              CONTROL
• THE WHIZ KIDS AT FORD
• MCNAMARA BECOMES PRESIDENT
  OF FORD THEN SEC. OF DEFENSE
• VIETNAM WAR BASED ON FPCC
• LOGICAL POSITIVISM
• RAF VS. V-1 RAIDS, EXAMPLE
• QUANT METHODS TAKE OVER IN
  ACADEMIA

                                     44
          PIERRE LAPLACE
         AND DETERMINISM

• BASED ON NEWTON’S LAWS
• WORKS IN LINEAR CONDITIONS
• BREAKS DOWN IN NONLINEAR
  CONDITIONS (TURBULENCE)
• EVENTS OF THE 70’S AND 80’S END
  THE APPEAL OF FPCC



                                    45
     NON-LINEAR CONTINGENCY

• EMERGENCE
 • NEW HOLISTIC REALITIES EMERGE AS
   OLDER PARTS CONNECT
 • THE NEW WHOLE IS NOT IMPLICIT IN
   THE OLDER PARTS
• POWERFUL TEAMS CAN EMERGE
  IN THIS FASHION


                                      46
        CHAPTER FIVE
“PEOPLE ARE OUR MOST IMPORTANT
          RESOURCE”




                                 47
       CAPITAL AND LABOR

• TERMS OF EMPLOYMENT FOR
  CAPITAL
• TERMS OF EMPLOYMENT FOR
  LABOR
• CAPITAL HAS A CHOICE, LABOR
  DOES NOT



                                48
        MANAGEMENT THEORIES
             (MODERN)
•   JETHRO, PLATO
•   MACHIAVELLI
•   MARX
•   TAYLOR
•   MAYO, MCGREGOR, FOLLET
•   DRUCKER



                              49
     POSTMODERN THEORIES
• W. EDWARDS DEMING & TQM IN
  THE 1980’S
• HAMMER AND CHAMPY AND THE
  REENGINEERING IN THE 90’S
• LINCOLN ELECTRIC
• GRAYS HARBOR PAPER
• THE CONCEPT OF PARTNERING


                               50
CHAPTER SIX
THE WAGE-RATE
   RATCHET




                51
      NEW DEAL LABOR LAWS

• DAVIS –BACON ACT
• WAGNER LABOR RELATIONS ACT
• FAIR LABOR STANDARDS ACT
• AIMED TO GET WAGES UP IN THE
  FACE OF HIGH UNEMPLOYMENT
  RATES
• IT WORKED VERY WELL (+50%)

                                 52
      EMPLOYMENT POLICIES
• DEPENDENCE ON HIRED LABOR
  TAKEN FOR GRANTED
• ADVERSARIAL RELATIONSHIP TAKEN AS
  A GIVEN
• EQUITY PRINCIPLE
  • EQUAL PAY FOR EQUAL WORK
  • MORE OR LESS PAY FOR MORE OR LESS
    IMPORTANT WORK




                                        53
        RATCHET DRIVERS
• WHIPSAW WAGE BARGAINING
• BUSINESS CYCLE SWINGS
• JOB EVALUATION
 • UNDER-RATED JOBS RAISED IN PAY
 • OVER-RATED JOBS MAINTAIN PAY
 • INTERDEPENDENT JOBS CANNOT BE
   OBJECTIVELY RANK IN THEIR ORDER
   OF IMPORTANCE.



                                     54
    CYCLICAL SKILL DILUTION
• NEW EMPLOYEES TAKE TIME TO
  LEARN THEIR JOBS
• THEY ARE SLOWER AND MAKE
  MISTAKES WHILE LEARNING
• FIRM MUST OVER-HIRE ON
  UPSWING
• BIDS WAGES UP
• COST OF TRAINING WASTED VIA
  LAYOFFS

                                55
     MACRO ECONOMIC EFFECTS

• WAGE/PRICE SPIRAL AND COST
  PUSH INFLATION SINCE 1945

• STAGFLATION (HIGHER RATES OF
  UNEMPLOYMENT WITH HIGHER
  RATES OF INFLATION) (1973-1983)



                                    56
CHAPTER SEVEN

 THE GREAT
DEPRESSION
 (1929-1933)
                57
         USA HARDEST HIT
• US INDUSTRIAL OUTPUT FALLS
  40%
• INDUSTRIAL UNEMPLOYMENT =
  40%
• GNP FELL FROM $104 b. TO $55.6 b
  BETWEEN 1929-1933
• BRITISH GNP FELL ABOUT 10% IN
  THE SAME PERIOD.
• JAPAN’S GNP ROSE 6%
                                     58
        THE FARM SECTOR
         WAS DIFFERENT
• FARM PRICES PLUNGE 50%+ VS.
  15% FOR INDUSTRY
• LOW FARM OUTPUT PRICES, HIGH
  INPUT PRICES (INDUSTRY)
• FARM OUTPUT REMAINS STABLE
• FARM EMPLOYMENT RISES A BIT



                                 59
     THEORIES OF THE CAUSE

• WORKERS REFUSE WAGE CUTS
  BUT THIS ARGUMENT IS
  UNPOPULAR
• KEYNES AND OVERSAVING PLUS
  MONEY ILLUSION
• MEANS AND ADMINISTERED
  PRICES
• FRIEDMAN AND THE FED
• WSJ AND SMOOT-HAWLEY TARIFF
• SCHUMPETER’S TRIPLE CYCLE
                                60
     PROBLEMS WITH KEYNES
• KEYNES ARGUED SAY’S LAW FAILED
  BUT IT WORKED AS ADVERTISED IN THE
  FARM SECTOR
• SAVINGS RATE IN THE 1920’S ONLY 4%,
  HARDLY EXCESSIVE
• WHERE INDUSTRIAL INPUT PRICES
  FELL, SO DID OUTPUT PRICES AND
  PRODUCTION AND EMPLOYMENT
  REMAINED HIGHER


                                        61
     PROBLEMS WITH MEANS
• WHERE INPUT PRICES FELL, SO DID
  OUTPUT PRICES
 • EXAMPLES FROM FARM, OIL, AND
   AIRLINE SECTOR
 • AUTO PRICES FELL BY 50% IN 1920’S
• JAPAN EVEN MORE OLIGOPOLISTIC
  THAN THE USA BUT ZAIBATSU CUT
  PRICES SHARPLY.


                                       62
    PROBLEMS WITH FRIEDMAN

• HIGH INTEREST RATES HURT
  FARMERS MORE THAN BUSINESS
• BUT FARMERS STILL MAINTAINED
  EMPLOYMENT AND OUTPUT
• BECAUSE PRICES FELL SHARPLY.




                                 63
PROBLEMS WITH WSJ SMOOT HAWLEY THESIS
   • TRADE DOWN SHARPLY BEFORE
     SMOOT- HAWLEY TOOK EFFECT

   • TARIFF BARRIERS DID NOT
     PREVENT JAPANESE EXPORTS
     FROM RISING SHARPLY




                                    64
SCHUMPETER’S TRIPLE CYCLE THEORY
• GIVEN RIGID WAGE RATES THIS
  THEORY IS PLAUSIBLE
• BUSINESS CYCLE AT 3 YEARS
• CONSTRUCTION CYCLE AT 7
  YEARS
• LONG WAVE CYCLE (MATURITY OF
  AUTO INDUSTRY) AT 30 YEARS
• IF ALL GO DOWN AT ONCE:
 CRASH
                                   65
CHAPTER EIGHT
  CORPORATE
 PARTNERSHIP




                66
        RELATIONSHIPS
• DIFFERENT RELATIONSHIPS
  CREATE DIFFERENT REALITIES
• PARTNERSHIP SETS UP A
  DIFFERENT SET OF MOTIVATIONS
• INTEGRATES INTERESTS OF
  CAPITAL AND LABOR, EMPLOYER
  AND EMPLOYEES



                                 67
    PARTNERSHIP ADVANTAGES
• PARTNERS HAVE ELASTIC LABOR
  COSTS
• THUS GREATER PRICING FLEXIBILITY
• PARTNERS OPTIMIZE THE INTERESTS OF
  THE WHOLE ENTERPRISE, NOT THE JOB
• BETTER TEAM SPIRIT, TEAMWORK
• MORE WILLINGNESS TO REDUCE WASTE
• BETTER CUSTOMER FOCUS


                                       68
TERMS OF MEMBERSHIP AND COMPENSATION

  • EMPLOYEE IS A MEMBER OF THE
    FIRM, NOT A HIRELING
  • PAY THE PERSON NOT THE JOB
  • PROMOTE IN PAY GRADE NOT IN
    JOB TITLE
  • PARTNERS RISE IN PAY GRADE AS
    THEY RISE IN EXPERIENCE


                                    69
      DIMENSIONS OF EXPERIENCE

•   LENGTH OF TIME SERVED
•   BREADTH OF SKILLS
•   DEPTH OF SKILLS
•   WEIGHTS DEPEND ON THE FIRM
•   CROSS TRAINING IMPORTANT
•   OBJECTIVE MEASURES WHERE
    POSSIBLE

                                 70
     DEPLOYMENT FLEXIBILITY
• ABILITY DETERMINES WHO DOES
  WHAT.
• JOB ROTATION EASIER
• CROSS TRAINING REVEALS
  ABILITY
• TRANSFERS DO NOT IMPLY
  DEMOTIONS OR PROMOTIONS
• PROMOTION IS IN GRADE

                                71
         LABOR COSTS

• GIVEN FLEXIBLE LABOR COSTS,
  ANY RIVALRY WILL FORCE PRICE
  CUTS IN A DOWNTURN, EVEN
  AMONG OLIGOPOLISTS
• GIVEN RIGID WAGE COSTS, EVEN
  PERFECT COMPETITION WILL NOT
  FORCE PRICES DOWN ENOUGH TO
  AVOID UNEMPLOYMENT

                                 72
     CYCLICAL PARTNERSHIPS

• SKILL DILUTION AVOIDED ON THE
  UPTURN
• LOSS OF TRAINING INVESTMENT
  AVOIDED ON THE DOWN TURN
• RATIO OF OPERATIONS TO
  TRAINING TIME VARIES
• FLEXIBLE BONUSES REPLACE
  LAYOFFS


                                  73
 PARTNERSHIP AS SHARK REPELLENT
• UNFRIENDLY TAKE-OVERS BUY
  STOCK TO TAKE CONTROL OF THE
  BOARD OF DIRECTORS
• PARTNERS SHARE BOARD WITH
  STOCKHOLDERS
• SHARKS FROZEN OUT




                                  74
     CHAPTER NINE
TRANSITION TO PARTNERSHIP




                            75
           FIRST STEPS
• DETACH PAY GRADES FROM JOB
  CONTENT
• IMPLEMENT EXPERIENCE BASED
  PROMOTION PLAN
• ADJUST TOP MANAGEMENT PAY IF OUT
  OF LINE
• REPLACE HIGH SALARIES WITH STOCK
• PARTNER BONUS RISES OR FALLS WITH
  PARTNERSHIP PERFORMANCE


                                      76
        THE CRUNCH ISSUE

• WAGE CUTS TO BE ELIGIBLE FOR
  AN UNCAPPED BONUS?
• THE INFLATION OPTION
• EARNINGS FLEXIBILITY AS THE
  MAJOR PRECONDITION FOR
  EMPLOYMENT STABILITY
• BASE TO BONUS RATIO


                                 77
         OTHER ISSUES
• WHO IS ELIGIBLE?
• UNIONS
• NEGOTIATIONS ON DIVIDING THE
  PIE
• BOARD OF DIRECTORS
• WHY SHOULD STOCKHOLDERS
  SHARE POWER?
• THE TAX QUESTION


                                 78
     CHAPTER TEN
THE POSTMODERN ECONOMY




                         79
        FULL EMPLOYMENT
• PARTNERSHIP FACILITATES SAY’S
  LAW
• IF COSTS ARE FLEXIBLE, PRICES
  WILL FALL
• EARNINGS DROP BUT
  EMPLOYMENT REMAINS STABLE




                                  80
      CORPORATE LONGEVITY

• PARTNERSHIPS MORE LIKELY TO
  INNOVATE TO AVOID EXTINCTION
• GREATER FLEXIBILITY
• LESS JOB DEFENSIVENESS
• GREATER COST RESILIENCE




                                 81
        SOCIAL HARMONY

• EVERYONE SHARES GOOD AND
  BAD TIMES
• INTEGRATED INTERESTS REDUCES
  ETHNIC DIVISIVENESS
• EASIER TO INTEGRATE DIVERSITY
  IN A PARTNERSHIP



                                  82
         STABLE PRICES

• PARTNERSHIP AVOIDS
  SYSTEMATIC WAGE RATCHET

• DEACTIVATES WAGE/PRICE SPIRAL

• LESS WASTE


                                  83
           WELFARE

• CORPORATION TAKES OVER MUCH
  OF THE WELFARE NOW PAID FOR
  BY THE GOVERNMENT
• LESS NEED FOR UNEMPLOYMENT
  COMPENSATION
• LOWER TAXES



                                84
      FOREIGN COMPETITION

• PRICE FLEXIBILITY IMPROVES
  COMPETITIVE ADVANTAGE
• QUICKER TO INNOVATE
• QUICKER TO RESPOND TO OTHER
  CHALLENGES
• LESS NEED FOR MANY POLICIES
  THAT WERE DRIVEN BY RIGID
  BUREAUCRACY


                                85
POSTMODERN MANAGEMENT
  AND THE NEW SCIENCE
       (Appendix)




                        86
PROBLEMS WITH THE MECHANISTIC MODEL
  • DEHUMANIZES PEOPLE INTO
    MACHINES OR COMMODITIES
  • MAKES NO ROOM FOR IMMATERIAL
    ENTITIES SUCH AS ESPRIT DE
    CORPS
  • DETERMINISTIC; ASSUMES A
    LINEAR ENVIRONOMENT IN A
    NONLINEAR WORLD OF
    TURBULENCE
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EMERGENCE OF QUANTUM MECHANICS
• BLACK BOX RADIATION PROBLEM
• BOHR’S “EMPTY” ATOM
• THE WAVE/PARTICLE DUALITY
• HEISENBERG’S UNCERTAINTY
  PRINCIPLE
• THE NEW REALITY;
  RELATIONSHIPS RATHER THAN
  “THINGS”
• NON LOCALITY
                                 88
             CHAOS THEORY
• NONLINEARITY = BUTTERFLY EFFECT =
• THE HORSESHOE NAIL EFFECT
• EXAMPLES FROM LIFE
  •   BOEING
  •   MICROSOFT
  •   WORLD WAR I
  •   RUSSIAN REVOLUTION
  •   MOST ACCIDENTS




                                      89
    QUANTUM CONTROVERSIES

• EINSTEIN’S OBJECTION: DOES
  GOD PLAY DICE?
• COPENHAGEN INTERPRETATION
  OF NEILS BOHR: DON’T TELL GOD
  WHAT TO DO, ALBERT.
• MANY WORLDS INTERPRETATION



                                  90
   THE POSTMODERN WORLDVIEW
• FROM MECHANISTIC TO ORGANIC
• FROM REDUCTIONISM TO HOLISM
• FROM AN IMPERSONAL UNIVERSE TO A
  PARTICIIPATORY UNIVERSE
• FROM MATERIALISM TO SPIRITUAL
  REALITY
• FROM STARS TO TEAMS
• FROM BUREAUCRATIC CAPITALISM TO
  ORGANIC FREE ENTERPRISE


                                     91