The year is 1958. It’s a time of prosperity, productivity, and industrial growth for U.S. corporations, which dominate the world economy. Organizations are growing bigger and more complex by the day. Transatlantic cable service, which has just been initiated, and advances in transportation are allowing companies to expand into international markets. To handle the growth, companies are decentralizing decision making. To keep track of these burgeoning operations, they are hiring middle managers in droves. In fact, for the first time ever, white-collar workers outnumber blue-collar workers. Large companies are installing their first computers to automate routine clerical and production tasks, and “participatory management” is the buzzword.

Note: Reprints of “Management in the 1980s,” by Harold J. Leavitt and Thomas L. Whisler, HBR November–December 1958, p. 41, are available at www.harvardbusinessonline.org. Reprint number 58605.

It’s also the year Harold J. Leavitt and Thomas L. Whisler predicted what corporate life would be like 30 years later. Their article “Management in the 1980s” (HBR November–December 1958) and its predictions ran counter to the trends that were then underway. Leavitt and Whisler said, for instance, that by the late 1980s, the combination of management science and information technology would cause middle-management ranks to shrink, top management to take on more of the creative functions, and large organizations to centralize again. Through the 1960s, 1970s, and early 1980s, Leavitt and Whisler’s predictions met strong criticism. But as the 1980s draw to a close, they don’t seem so farfetched. Instead, they seem downright visionary. (See the insert, “Their Future, Our Present.”)

Downsizing and “flattening” have been common in recent years. One estimate has it that organizations have shed more than one million managers and staff professionals since 1979. As companies have reduced the number of middle managers, senior managers have increased their span of control and assumed additional responsibilities. Consider these two examples:

• Within weeks after a comprehensive restructuring thinned management by 40%, the president of a large oil company requested an improved management control system for his newly appointed senior management team. In response, a sophisticated, online executive information system was developed. It did the work of scores of analysts and mid-level managers whose responsibilities had been to produce charts and graphs, communicate this information, and coordinate operations with others in the company. The president also mandated the use of electronic mail to streamline communication throughout the business.

• A large manufacturing company recently undertook a massive restructuring to cut the cost and time required to bring a new product to market. The effort included layoffs, divestitures, and early retirements, which thinned middle management by 30%. The company adopted a sophisticated telecommunications network, which linked all parts of the multinational company, and a centralized corporate data base, which integrated all aspects of the highly decentralized business. Senior managers used the data base and networks to summarize and display data from inside and outside the company and to signal to employees the kinds of things they should focus on.

Information technology, which had once been a tool for organizational expansion, has become a tool for downsizing and restructuring. Both these companies used technology to improve centralized control and to create new information channels. But this improved centralized control did not come at the expense of decentralized decision making. In fact, the need to be responsive led to even more decentralized decision making. The companies reduced the number of middle managers, and the computer systems assumed many of the communication, coordination, and control functions that middle managers previously performed. The line managers who remained were liberated from some routine tasks and had more responsibility.

These effects are similar to what Leavitt and Whisler predicted. Taking their clues from the management science and technology research of the 1950s, Leavitt and Whisler contemplated how technology would influence the shape and nature of the organization. They understood that technology would enable senior management to monitor and control large organizations more effectively and that fewer middle managers would be needed to analyze and relay information. They did not anticipate, however, that microcomputers would enable simultaneous improvement in decentralized decision making.

In the past, managers had to choose between a centralized and a decentralized structure. Today there is a third option: technology-driven control systems that support the flexibility and responsiveness of a decentralized organization as well as the integration and control of a centralized organization.

What Next?

Now that this wave of information technology has worked its way into practice, it’s time to think about where we’re headed next. When we turn to research to see what technical breakthroughs are on the horizon, as Leavitt and Whisler did, we find that the horizon itself has changed. It’s now much closer. Since the 1950s, development time has been cut in half. What once took 30 years to get from pure research to commercial application now takes only 10 to 15.

Moreover, when earlier generations of technology were commercialized, managers tended to adopt the technology first and then try to figure out what to do with the new information and how to cope with the organizational implications. But for many companies, that approach is now grossly inadequate. The new technology is more powerful, more diverse, and increasingly entwined with the organization’s critical business processes. Continuing to merely react to new technology and the organizational change it triggers could throw a business into a tailspin.

At the same time, the business environment is changing ever faster, and organizations must be more responsive to it. Yet certain facts of life restrain them from doing so. Companies want to be more flexible, yet job descriptions, compensation schemes, and control mechanisms are rigid. They want to use their resources effectively, yet it’s not always clear who can contribute most to a project, especially among people in different functional areas. They want to be productive, but every time an employee goes to another company, a little bit of corporate history and experience walks out the door.

With the help of technology, managers will be able to overcome these problems and make their organizations far more responsive than they are today. We can look forward, in fact, to an era in which managers will do the shaping. Large organization or small, centralized or not—business leaders will have options they’ve never had before. The technology will be there to turn the vision into reality and to change it as circumstances evolve. With that in mind, making a next round of predictions and waiting to see if they come true seems too passive. It makes more sense to begin thinking about the kind of organization we want and taking the steps necessary to prepare for it.

We already see glimpses of the future in some progressive companies that have used technology creatively, but even they do not give us a complete picture of the kind of organization that will be possible—maybe even prevalent—in the twenty-first century. Some companies will choose to adopt a new organizational form that we call the “cluster organization.”¹ By doing so, they will be able to run their large companies like small ones and achieve the benefits of both.

In the cluster organization, groups of people will work together to solve business problems or define a process and will then disband when the job is done. Team members may be geographically dispersed and unacquainted with each other, but information and communication systems will enable those with complementary skills to work together. The systems will help the teams carry out their activities and track the results of their decisions. Reporting relationships, control mechanisms, compensation schemes—all will be different in the cluster organization.

Technology will offer new options even to companies that don’t wish to make all of the changes the cluster organization implies. The first step in understanding these options is to look, as Leavitt and Whisler did, at the technologies that will make them possible.

Tomorrow’s Machines

Much of the technology that will give managers the freedom to shape their organizations is already being commercialized—expert systems, group and cooperative work systems, and cooperative work systems, executive information systems. Expert and knowledge-based systems (a subset of artificial intelligence technology) are rapidly appearing in commercial settings. Every large company we’ve polled expects to have at least one production system using this technology by late 1989. Group and cooperative work systems have sprung up in a number of companies, primarily for use by multidisciplinary teams. Executive information systems, which track both internal and external information, enable senior managers to monitor and control large, geographically dispersed and complex organizations.

By the turn of the century, these and other technologies will be widely available. Companies will be able to pick and choose applications that fit their requirements. Computers will be faster, smaller, more reliable, and easier to use. They’ll store vast amounts of information, and they’ll be flexible enough to allow companies to change their information and communication systems as the environment changes.

In the twenty-first century, desktop computers will be as powerful as today’s supercomputers, and supercomputers will run at speeds over a thousand times faster than today’s. Computer chips now with one million processing elements will have more than one billion, and parallel processing (the ability to share a task among a number of processing units) will boost power tremendously.

It will be possible to communicate voluminous amounts of information in a variety of forms over long distances within seconds. Standard telephone lines and advanced cellular radio technology will provide access to high-speed networks that will whisk data, text, graphics, voice, and video information from one part of the world and send it to another instantly. Improved reliability and security will accompany the significantly higher network speeds and the improved performance.

Plugging all shapes and sizes of computers into tomorrow’s network will be as easy as plugging in a telephone today. Telephones, in fact, will be replaced by computer phones that can convert speech into machine-readable text and can simultaneously transmit video images, voice, and data. Storing messages, transferring documents, paying bills, and shopping at home will all be possible through the same connection.

Computers the size of a small book will have the information processing power and storage capabilities of today’s desktop workstations, yet will fit in a briefcase. They’ll enable us to create and revise documents, review and answer mail, and even hold video conference meetings from anyplace that has a phone jack. Cellular terminals will allow even more freedom, since they won’t require a wired telephone connection. And we will no longer be a slave to the keyboard; voice recognition technology will allow us to dictate messages and create and revise text as easily as using a dictaphone.

As computers become faster at processing and communicating information, we’ll need better ways of storing and managing it. Optical storage media, similar to the compact-disk technology that is used today to store music, will hold much more information than is possible today and will retrieve information much more quickly.

And no longer will it be necessary to store data in static data bases that must be reprogrammed every time the business changes. Flexible, dynamic information networks called associative networks will do away with these rigid systems. Associative networks will allow us to store and manipulate information in a manner similar to the way we think. They will store data, voice, video, text, and graphics—but beyond that, they will store the relationships between information elements. As needs change and the network is reconfigured, the relationships among the data remain intact. Primitive associative information systems, used primarily to process large-text data bases (e.g., hypertext), are currently on the market. We can expect significant enhancements to these associative information systems in the next several years.

Tomorrow’s computers will truly be more intelligent. Today’s computers are designed to process information sequentially, one command at a time. This capability works well if the problem or task is structured and can be broken down into a series of steps. It doesn’t work well for complex, unstructured tasks involving insight, creativity, and judgment. “Neural network” computers will change that.

Rather than processing commands one at a time, a neural network computer uses associative reasoning to store information as patterns of connections among millions of tiny processors, all of which are linked together. These computers attempt to mimic the actions of the human brain. When faced with a new pattern, the computer follows rules of logic to ask questions that help it figure out what to do with the anomaly.

Prototypes of neural network computers already exist. One group of researchers developed a neural network computer that contained the logic to understand English phonetics. The researchers gave the computer typed transcripts, containing 1,024 words, from a child in first grade, and it proceeded to read out loud. A human instructor “told” the computer each time it made a mistake, and within ten tries, the computer was reading the text in an understandable way. Within 50 tries, the computer was reading at 95% accuracy. No software programming was ever done.² The computer learned to read in much the same way that humans do.

We can also expect that by the twenty-first century there will be many companies that routinely use expert systems and other artificial intelligence applications. Knowledge bases, in which expertise is stored along with information, will become as commonplace as data bases are today. Technology will increasingly help people perform tasks requiring judgment and expert knowledge. Already, fighter aircraft technology is moving toward having the plane respond to what the pilot is thinking rather than his physical movements.

This type of technology will no longer simply make things more efficient; instead, the computer will become a tool for creativity, discovery, and education. Interactive technology based on optical storage is currently used in flight simulators to help pilots learn to make decisions. Some companies are experimenting with similar systems, described as digital video interactive, to help planners, analysts, researchers, functional specialists, and managers learn to make decisions without the risk and time associated with traditional experiential learning. These should help managers learn to be effective much more quickly.

Technologies will be well developed to meet the needs of senior executives. Sophisticated analytical, graphical, and computer interface capabilities will be able to aggregate, integrate, and present data in flexible and easy-to-use formats. Computers and special software will support executive planning, decision making, communication, and control activities. Some executives already use these applications to manage their businesses.

While in the past computers primarily supported individual work, the computer systems of the future will also be geared toward groups. Research on computer support for cooperative work has gained momentum over the past five years, and many companies are developing promising new technologies. Several companies are installing automated meeting rooms, and a number of vendors are working on software to support group activities. Researchers are now testing electronic brainstorming, group consensus, and negotiation software, and general meeting support systems. To help geographically dispersed group members work together, some companies are developing electronic communication software and applications that make communication and the exchange of documents and ideas faster and easier. These applications will allow skills to be better allocated.

The Structure, the Process, and the People

These and other advanced technologies will give managers a whole new set of options for structuring and operating their businesses. In the twenty-first century, like today, some companies will be small, some will be large; some will be decentralized, others will not. But technology will enable new organizational structures and management processes to spring up around the familiar ones, and the business world will be a very different place as a result. Here we describe the organizational structures, management processes, and human resource management strategies associated with the cluster organization and how the technology will make them possible in years to come.

The hierarchy and the matrix are the most common formal organization designs for large companies today. They structure communication, responsibility, and accountability to help reduce complexity and provide stability. But, as implemented today, they also tend to stifle innovation. With the environment changing as quickly as it does, the challenge has been to make large companies, with their economies of scale and other size advantages, as responsive as small ones.

Small companies, of course, have fewer layers of management and less bureaucracy, so the organization is less rigid. They adapt more easily to change and allow for creativity. Leadership and control are generally easier in small businesses because top management can communicate directly with workers and can readily trace the contribution individuals make. Information is also easier to track. Much of the knowledge is in people’s heads, and everyone knows who to go to for expertise on a particular subject. People often have a chance to get involved with a broad range of responsibilities and therefore have a better understanding of the business as a whole.

These small organizations, especially those that are information-intensive and have a large percentage of professional employees, tend to be structured differently. We have termed the most fluid and flexible forms “cluster.” Other authors talk of a network organization or an adhocracy.³ In the network organization, rigid hierarchies are replaced by formal and informal communication networks that connect all parts of the company. In the adhocracy, a set of project-oriented work groups replace the hierarchy. Both of these forms are well known for their flexibility and adaptiveness. The Manned Space Flight Center of NASA, an example of an adhocracy, changed its organization structure 17 times in the first 8 years of its existence.⁴

In what will be an even faster changing world than the one we now know, businesses of all sizes will need the ability to adapt to the dynamics of the external environment. Automated information and communication networks will support the sharing of information throughout a large, widely dispersed, complex company. The systems will form the organization’s infrastructure and change the role of formal reporting procedures. Even in large corporations, each individual will be able to communicate with any other—just as if he or she worked in a small company.

Computers will also help identify who in the company has the expertise needed to work on a particular problem. Data bases of employees’ skills and backgrounds will ensure that the mix of talent can be tailor-made for every task that arises. The systems will keep track of who knows what, and how to prepare an individual for the next project.

Managers in large companies will also have technological help in keeping track of where information resides and how to analyze it. Associative information networks and neural network computers will preserve the relationships among data elements and will store and manage information in a manner similar to the way we think. They will provide concise snapshots of the vast activities and resources of a large corporation. This will prevent managers from being overwhelmed by the scale and complexity.

Executives and senior managers will be less insulated from operations because executive information systems will help them get the information they need to monitor, coordinate, and control their businesses. Rather than waiting for the analysts and middle managers to prepare reports at the end of a prolonged reporting period, executives will have immediate access to information. Software will help do the analysis and present it in a usable format. With such immediate feedback, managers will be able to adjust their strategy and tactics as circumstances evolve rather than at fixed time intervals. And if a change in tactics or strategy is warranted, advanced communication technology will send the message to employees promptly.

Top management’s ability to know what is going on throughout the organization won’t automatically lead to centralization. With feedback on operations readily available at the top, the rigid policies and procedures that now aim to keep line managers on track can be relaxed. The systems will also liberate business managers by giving them the information and analytic support they need to make decisions and control their operations. Individuals and project teams will be able to operate fairly autonomously while senior management monitors the overall effects of their actions by the hour or day.

Most of the day-to-day activity will be project oriented. Because circumstances will change even faster than they do now, no two situations will be exactly alike or call for the same set of experts or procedures. The employees’ skills and the approach will vary with the task at hand, so teams of people will form around particular projects and subsequently dissolve. Most responsibilities, then, will be handed over to project managers. Associative information networks will help those managers deploy resources, and software specially designed to support group work will aid communication, decision making, and consensus reaching. People who work together only infrequently will have the tools they need to be at least as effective as the permanent management team in a small company.

Decision making is not well understood in most organizations. Managers often make choices based on thought processes they themselves cannot explain. They gather the information they think is relevant and reach what seems like the best conclusion. In the future, sophisticated expert systems and knowledge bases will help to capture those decision-making processes. Companies can then analyze and improve them.

As the decision processes become more explicit and well-defined and as companies learn what information is required, the level of the person making the decision becomes less important. It will still be important to monitor the outcome and to make sure the circumstances surrounding the decision haven’t completely changed.

Management control is now exerted through the formal organizational chart. A manager at a given level in the organization is responsible for everything that happens below that level. That same person channels information up through the organization to the person he or she reports to.

But when technology allows top management to monitor data at the lowest organizational level without the help of intermediaries and when employees at all levels and in all functions can communicate directly, formal control systems do not have to be embedded in organizational reporting relationships. The ability to separate control from reporting relationships means that both systems can be handled most effectively. For instance, top management can exercise control directly by monitoring results at all levels, while a different set of relationships exists for reporting purposes. These reporting relationships would focus on employee motivation, creativity, and socialization.

By doing a lot of the analytical work, expert systems and artificial intelligence tools will free up workers at all levels to be more creative. Up to now, only top management jobs have been structured to allow as much time as possible for creative thinking. As technology helps managers with coordination, control, decision making, and communication, they too will have the time and encouragement to make discoveries and use the new resources innovatively.

The transience of even specialized workers won’t be nearly the problem in the twenty-first century that it is today. Information systems will maintain the corporate history, experience, and expertise that long-time employees now hold. The information systems themselves—not the people—can become the stable structure of the organization. People will be free to come and go, but the value of their experience will be incorporated in the systems that will help them and their successors run the business.

In this environment, companies will need fewer managers. Those managers that do assume executive positions, however, will lack the experiential learning acquired through years as a middle manager. Their career paths will not take them through positions of increasing responsibility where they oversee the work of others. Executive information systems will enable them to “get up to speed” quickly on all parts of the business. Sophisticated business analysis and simulation models will help them analyze business situations and recognize the consequences, thereby decreasing and managing risk.

In the 1950s and 1960s, computers took on many operational and routine tasks. In the 1970s and 1980s, they assumed some middle-management decision making, coordinating, and controlling tasks. As the technology affects even more aspects of the business, work itself will change and require a different set of skills. People will need to be technically sophisticated and better educated in order to cope with the demands on them. Employees must be capable of leading—rather than being led by—the technology, capable of using technology as a lever against the increased complexity and pace of change in their business environments.

As top management seizes on its ability to monitor without restricting freedom, employees will have more control over their own work. There will be fewer rigid policies from a less visible headquarters. Also, as the nature of the work changes from implementing a particular company’s standard operating procedures to participating in a series of projects that call on one’s expertise, workers will be less tied to any one organization, and building loyalty to a company will be harder than it is today. In some companies, loyalty may be less critical than having access to the skills a given employee has to offer. As companies pull together the resources they need on a project-by-project basis and as information and communication networks extend beyond the organization, company boundaries will be harder to define. Organizations may draw on expertise that lies in a supplier or an independent consultant if appropriate.

Because workers will be highly skilled and the organization will offer fewer opportunities for advancement, employees will expect the work environment to be rewarding. If they are not stimulated or if their independence is threatened, they will go elsewhere.

In these ways, companies of the future will closely resemble professional service firms today. The most successful firms attract and retain employees by providing an environment that is intellectually engaging. The work is challenging, the projects diverse, and the relationships with clients fairly independent. Some professionals work with more than one firm—like doctors who admit patients to several hospitals.

Management will be a part-time job as group members share responsibility and rotate leadership. Except at the top of the organization, there will be few jobs that consist solely of overseeing the work of others—and then primarily for measurement and control purposes. Each work group may have a different leader. In addition, the leadership of a single group may rotate among members, depending on what the business problem requires. Employees will take on a management role for short periods, and as a result, will have a better understanding of the entire business.

Detailed, task-oriented job descriptions will be less important because the job will be changing all the time. In a sense, everyone will be doing the same job—lending their special skills and expertise to one project after another. In another sense, every job will be unique—people with different kinds of expertise will work on different sets of projects. Information systems will be able to account for the work each person does and the skills and experience he or she possesses.

The ability to track each individual’s skill and participation in the company outside the traditional organizational forms creates a whole new freedom: the ability to pay each person for his or her actual contribution to the organization without upsetting an entire pay scale or hierarchical structure. Currently, if the company wants to create an incentive for a particular person, it is often constrained by the compensation system itself. To raise one person’s salary requires boosting everyone else above that point in the hierarchy.

Flexible, dynamic compensation packages will allow companies to treat individuals as unique contributors and to reward them based on their particular skills. In some companies, an employee’s compensation may follow the pattern of a normal distribution curve, matching the employee’s desired work pattern and contribution to the company. Salaries would increase and peak between ages 40 and 50, and then decline.

Be Creative But Be Careful 

technology use in organizations suggests that in the future managers must be much more actively involved in directing technology and managing its influence on organizations.

Technology will not be an easy solution to serious problems and it won’t guarantee competitiveness. As always, it will require thoughtful planning and responsible management. But as never before, it will tax the creative powers of the business leaders who must decide when to use it—and to what end.

1. See D. Quinn Mills, The Cluster Organization: A New Alternative to the Hierarchy (forthcoming, 1989).

2. Terrence Sejnowski and Charles Rosenberg, “Parallel Networks That Learn to Pronounce English Text,” Complex Systems, vol. 1, 1987, p. 145.

3. See Robert G. Eccles and Dwight B. Crane, “Managing Through Networks in Investment Banking,” California Management Review, Fall 1987, p. 176; and Henry Mintzberg, “The Adhocracy,” in The Strategy Process, ed. James Brian Quinn, Henry Mintzberg, and Robert M. James (Englewood Cliffs, N.J.: Prentice-Hall, 1988), p. 607.

4. As reported in Henry Mintzberg, Structuring in Fives: Designing Effective Organizations (Englewood Cliffs, N.J.: Prentice-Hall, 1983).

Source: https://hbr.org/1988/11/inforation-technology-and-tomorrows-manager