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New Templates for Today’s Organizations
New Templates for Today’s Organizations
by Peter F. Drucker


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Today’s businesses are increasingly complex and diverse. In this article, a well-known organization theorist describes new principles of organization design now in use and their applications to today’s businesses and institutions. It is his position that not onlymust the new principles make it possible for organizations to function and perform, but they must also serve the higher goals of human endeavor.

Organization structures are becoming increasingly short-lived and unstable.

The “classical” organization structures of the 1920s and 1930s, which still serve as textbook examples, stood for decades without needing more than an occasional touching up.American Telephone & Telegraph, General Motors, DuPont, Unilever, and Sears, Roebuck maintained their organizational concepts, structures, and basic components through several management generations and major changes in the size and scope of the business. Today, however, a company no sooner finishes a major job of reorganizing itself than it starts all over again.

General Electric, for instance,finished a tremendous organization overhaul around 1960, after almost a decade of hard work; since then it has revamped both its structure and its overall strategies at least twice. Similarly, Imperial Chemicals in Great Britain is restructuring an organization design that is barely 10 years old. And the same restlessness and instability afflict organization structures and concepts in the largeU.S. commercial banks, in IBM, and in U.S. government agencies. For instance, the Health, Education and Welfare Department has been subjected to a “final” reorganization almost every year in its 20-year history.

To some extent this instability is a result of gross overorganizing. Companies are resorting to reorganization as a kind of miracle drug in lieu of diagnosing their ailments. Everybusiness observer can see dozens of cases where substantial, even massive organization surgery is being misapplied to take care of a fairly minor procedural problem, or—even more often—to avoid facing up to personnel decisions. Equally common is the misuse of reorganization as a substitute for hard thinking on objectives, strategies, and priorities. Few managers seem to recognize that the rightorganization structure is not performance itself, but rather a prerequisite of performance. The wrong structure is indeed a guarantee of nonperformance; it produces friction and frustration, puts the spotlight on the wrong issues, and makes mountains out of trivia. But “perfect organization” is like “perfect health”: the test is the ills it does not have and therefore does not have to cure.

Even ifunnecessary organization surgery were not as rampant in our institutions as unnecessary appendectomies, hysterectomies, and tonsillectomies are said to be in our hospitals, there would still be an organization crisis. Twenty years ago many managers had yet to learn that organization design and organization structure deserve attention, thinking, and hard work. Almost everyone accepts this today;indeed, organization studies have been one of the true “growth industries” of the past twenty years. But while a few years ago organization theory had “the answers,” today all is confusion.

The crisis is simultaneously a crisis of organization theory and of organization practice. Ironically, what is happening is not at all what organization theorists like Chris Argyris, Warren Bennis, Douglas...
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