By: Norman Macrae
In a survey called
"The coming entrepreneurial revolution" in The Economist
of December 25, 1976, Norman Macrae argued that "methods
of operation in business are going to change radically in
the next few decades, in a direction opposite to that which
most businessmen and nearly all politicians expect".
The survey aroused enthusiasm and infuriation in almost equal
measure, with invitations to lecture in more than 20 countries.
Today Macrae updates his views on management methods that
can make even lousy businesses profitable, and those that
are driving tighter organizations to the wall.
Big goes bust
1976 survey argued that the world was probably drawing to
the end of the era of big business corporations, because it
would soon be seen to be nonsense to have hierarchical managements
sitting in skyscraping offices trying to arrange how brainworkers
(who in future would be most workers) could best use their
imaginations. The main increases in employment would henceforth
come either in small firms or in those bigger firms that managed
to split themselves into smaller and smaller profit centres
which would need to become more and more entrepreneurial.
so often with supposedly controversial journalism, this proved
to be an exercise in tentatively forecasting something that
had already begun to happen a decade before, although it honestly
was the opposite of what was being most widely reported at
the time. In 1976 the textbooks being most assiduously fed
to business courses were still Ken Galbraith's. "The
new industrial state" and Jean-Jacques Servan-Schreiber's
"Le definamericain", each of which was a bible to
the advocates of industrial policies then subsidising British
Steels, British Leylands and Projects Concorde into growing
inefficiently larger and therefore irretrievably bust. These
mergers were procreated on the thesis, explicitly stated by
Ken Galbraith, that markets had been replaced by planning
in favor of big technostructures so that large organizations
like Chrysler or United States Steel did not lose money any
more. "By all but the pathologically romantic",
cried Ken Galbraith in 1967, "it is now recognized that
this is not the age of the small man". He believed that
the most economic size for business corporations in the future
could be "'very, very large".
before these two books were -written and, instantly reached
the best-selling lists, precisely the opposite trends had
remorselessly begun to occur.
1965 small workplaces were already outperforming big ones
on almost every count. Even in idealistic occupations, British
hospitals with under 100 beds had between one half and two
thirds the sickness rates among nurses as hospitals with more
than 100 beds. I got my saddest quote of the late 1970s from
the manager of a huge factory in Manchuria (though he could
find echoes at Detroit, London Airport, Kama River): "During
the period of disruption by the gang of four many workers
came only on pay-days, some carrying placards saying I was
a fly on top of putrescent meat. With 10,(XX) comrades here,
it was impossible to check the absenteeism, pilfering and
work-dodging that went on".
biggest world political event since the 1960s is that communist
countries have proved less able than free-market ones to escape
from inefficient giantism in state factories and farms, so
they are all going bust. In free-market countries managers
are eventually more willing to lose face than their shareholders
are to lose money, but tough problems are arising as even
capitalist giants slim.
the mid-1960s the thousand biggest firms in the United States
have as a group been sensibly reducing their labour forces,
and more than the whole of the 15m private-sector jobs created
since then have come in smaller firms-the majority of the
new extra jobs at any one time being in firms less than five
years old, even though more than half of new small American
firms disappear out of business in their first five years.
Although survey dates are jumbled, the accompanying inadequate
charts suggest the same trend is accelerating even in manufacturing
across the capitalist world. The present capitalist conjuncture
is therefore one where the bigger and more stable firms are
running down their employment, while more than the whole of
net new employment is provided by small firms which, however,
frequently go bust. Ow! And some thought needs to be given
to ways of combining the advantages of small firms within
my 1976 survey I suggested there would be two trends-in the
most conventional of which, greater reliance on subcontracting,
I now think I was jejune. Subcontracting works only when the
big firm has very tight quality control (as have Marks and
Spencer, big Japanese companies towards tiny component makers
and the superbly entrepreneurial Italian textile industry,
see later). Subcontracting does not work when the big firm
cannot measure what quality is, so that many management consultants,
public relations firms etc. are about to disappear because
they are high-cost ramps.
second system I suggested in 1976 was that dynamic corporations
of the future should simultaneously be trying several alternative
ways of doing things in competition within themselves, becoming
what have later been called confederations of "intrapreneurs".
Two key concepts for efficient businesses here. First, the
right size for each profit centre or intrapreneurial group-by
which I mean a group of friends working together in daily
productivity hunt towards the same objective-is very small,
probably not more than 10 or 11 people, however dynamic your
top management. Jesus Christ tried 12, and that proved one
too many. Second, firms should not pay people for attendance
at the workplace but should pay competing groups for modules
of work done.
if you need a typing pool, I have suggested it might be best
to set up several competing groups of Typists Intrapreneurial.
You would offer an index linked contract to the group for
a set period, specifying the services you wanted in return
for a lump-sum monthly payment. The typists would apportion
the work among themselves, devise their own flexitime, choose
their own lifestyles, decide whether to replace a leaver by
a full-timer or part-timer or whether to do her work and keep
more money per head. They could also decide whether to tender
for extra paid work from outside. In offices with tomorrow's
equipment, there could, see later, be a lot.
trivial example? By comparison with the gains that can be
made in other fields it is. Yet the EEC court of auditors
has recently ruled that the proper output for a typist is
around 24 pages a day, and was upset that in some EEC departments
the average, was only 12. In The Economist on a print-day
Wednesday, when we are feeling rather participatory, a top
secretary will type around 60 pages. If some EEC departments
went over to that pace through being Typists Intrapreneurial,
the stenographers could choose to work only one day a week
for the same weekly wage as now, or by slowing recruitment
they could work for up to five times their existing wages
for the same present attendance at the office, or they could
become five times more efficient. In practice, competition
would ensure a mixture of the three, and the scope in most
other parts of the business and bureaucratic jungle is much
survey will explore that wider jungle, starting from the intrapreneurial
mechanisms needed to breed new projects and going on through
to those needed eventually to kill outdated ones (and make
it participatory fun to send them to South Korea).
85% of all the industrial R & D expenditure in the United
States takes place in 300 large corporations. It is done very
70,000 patents are issued in the United States each year.
Of these, maybe 60,000 are never heard of again, because most
are horse manure. There will be some hidden pearls among it,
and more could be found if patent offices were more intrapreneurial
instead of often being inefficient government filing offices,
some not even properly computerized. Governments should establish
competing intrapreneurial teams in patent offices, compiling
the perhaps 10,000 new patents a year round the world that
are used, only about 10-20 a year are for what the co-inventor
of the ubiquitous integrated circuit, Mr. Jack Kilby, calls
"major" inventions things that change our lives.
A list of the world's major inventions over the past 50 years
shows that big organizations claim to have discovered only
around a third of them, and some of their claims are fibs.
More than two thirds have been discovered by individuals or
individual inventors' list of the past 50 years turns alphabetically
from air conditioning, automatic transmissions and ballpoint
pens, through jet engines and penicillin, to xerography and
the zipper. The big companies' list runs more predictably
through crease-resistant fabrics, float glass, synthetic detergents.
Note how these fit with corporate objectives; "We are
a big textile or soap company, so go for something capital-intensive".
"We are Pilkington's Glass, and if we can beat plate
glass by developing float glass, then every motor car in the
world will eventually pay us a royalty, so it is worth carrying
on with research into solving the last three problems in the
way of float glass even through 12 consecutive years of negative
should underestimate the tangible and intrapreneurial excitement
among a tiny group of researchers when such a big firm's opportunity
presents itself. Sir Alastair Pilkington has described how
his research group into float glass was kept small enough
to maintain total secrecy, so that experiments had been in
progress for seven years before competitors knew of them;
how several of his team members, after working impossibly
long hours, were carried away on stretchers suffering from
heat exhaustion; how 100,000 tons of float glass were made
and broken before the great day which produced the first bit
they could sell. But, to quote Jack Kilby again, each invention
presents a profile of opportunities and requirements, while
each company has its own profile of what constitutes to it
an acceptable product. The probability that these two profile,
will coincide in any given case is not very high.
result is that many big companies' brilliant researchers are,
in conditions of great secrecy, in their seventh consecutive
year of smashing unusable float glass.
most promising set of incentives for R and D departments to
stray down interesting byways has been suggested by Mr. Gifford
Pinchot III of Mr. Bob Schwartz's Tarrytown School for Entrepreneurs
near New York, and they are being tried out by some clients
of the new School for Intrapreneurs run by the Foresight Group
management consultancy in Sweden. I should have introduced
Mr. Pinchot before, because he is the inventor of the word
"intrapreneurs", in a paper which paid kindly tribute
to my 1976 survey. His description of what is happening in
semi-reforming big corporations.
alone is not enough. In a hierarchical organization, promotions
can be won by special graces, loyalty to one's boss and
general political skills. Courage, original thought, and
ability to observe the obvious do not necessarily lead to
success. If we are to get really good problem-solving in
our decentralized corporations, we must introduce a system
that gives the decision to those who get successful results,
not to the inoffensive. Such people will be willing to take
moderate risks and will be more concerned with achieving
results than gaining influence. These are among the characteristics
of the successful entrepreneur. What is needed in the large
corporation is not more semi-independent departments run
by hard-driving yes men, but something akin to free-market
entrepreneurship within the corporate organizations.
recommendations about intra-capital, see the next two paragraphs,
could prove one of the great social inventions.
Mr. Pinchot's proposals for R and D departments a researcher
wishing to plunge intrapreneurially into some project would
initially have to risk something of value to himself; such
as 10% of the costs of a project, up to 20% of his salary
for the duration of a project and two years thereafter. A
committee within the company would then contract to "buy"
completed research in an intrapreneurial scheme for both cash
bonuses and intra-capital. If a company makes $lm on a project,
the intrapreneur's share might be $100,000, of which only
$10,000 might come in cash and $90,000 might come in intra-capital
which the intrapreneur can invest on the corporation's behalf
in future R and D projects of his own choice. If he is successful
again, his reward will be another cash bonus (probably larger
the second time) plus more intra-capital.
system, says Mr. Pinchot, motivates creative staff to think
practically and frees their individual initiative. It minimizes
politics and maximizes performance as a criterion for advancement.
It rapidly puts a portion of the company's R and D budget
in the hands of proven winners. It gives any good research
staffer a strong reason to stay with the company, since leaving
would mean giving up control of his accumulated intra-capital.
own variant of the Pinchot scheme would put less emphasis
on the idea of the company undertaking projects, more on it
helping to farm them out, while still rewarding the intrapreneurial
inventor in Pinchot's way. To quote Mr. Ralph Landau (founder
of Halcon International, and one of America's most successful
entrepreneurs), there are two stages in innovation: (a) the
conception or invention of a new or improved process, product
or system; (b) the commercialization of it. Stage (b), the
commercialization, will generally cost between two and ten
times as much as stage (a). This great expense of commercialization
for products that do not fit a particular firm's "profile"creates
a danger. Intrapreneurialism in R and D will not go fast enough
if it becomes a device for regruntling touchy young Boffin
by pretending to put his wheeze along the company's existing
production and distribution lines that are quite unfitted
leads to supermarkets for ideas. A big next vogue should be
the sale of ideas telecommunicated between computer terminals.
Everybody should have different ideas on how to tie intra-capital
into these and how the offering firm can sift for quality;
but, once competing mechanisms are established, sales of ideas
should be decided intrapreneurialy, as sales of goods already
are in firms whose salesmen are virtually independent businessmen
working on commission. Franchising extends this concept. The
only sales element subject to "tight central control"
in such companies is the salesmen's expense account, which
is therefore the one element on which the central controller
is always swindled.
steel mill's eels
Pinchot's group at Tarrytown is soon going to establish in
America the world's second school for intrapreneurs. The first
started when the Foresight Group (itself originally four intrapreneurial
Swedes operating from their homes) in 1980 persuaded some
Swedish client companies to announce on their internal notice
boards: "any would-be intrapreneur come to a meeting".
In most companies 40-60 turned up, about equally upper-blue-collar
and middle-management. The school wanted 2-4 from each company
for the first course, each with a separate specific intrapreneurial
idea. Twelve people lasted through the first Swedish course,
which consisted of six meetings-the first of a week, the next
five each of three days. The course tried to turn each fuzzy
idea into a business concept, then into a business plan.
those first graduates in 1981 there are now emerging (eg)
two use-of waste-heat projects (one man is pumping a steel
mill's heat into a pond that breeds eels, another a paper
mill's heat and computer knowhow into some computerized greenhouses);
a man from a building company is making prefabricated concrete
elevator shafts (likely to boom in Sweden because of new environmental
rules demanding too many lifts for the handicapped); and an
Esso man is converting repair garages behind filling stations
(many of which are closing) into places to store and lease
out do-it-your-self equipment. Some of these look more like
the creation of small new capitalists than intrapreneurial
ventures, but Sweden's silly tax law (which is suspicious
of the transfer of forgone income to capital) makes intra-capital
would be wise for all governments to alter this sort of tax
law. Other government policies "in favour of entrepreneurship"
make less sense.
should be in favour of governments granting special credit
and other favours to small and innovative firms. If governments
are ass enough artificially to increase supply by granting
special favours, Silicon Valleys are going to go quickly bust.
a test case, suppose this is 1946. Here are some accurate
market forecasts for the succeeding seven years for a product
that alters the living habits of over two thirds of the population
of the world. In 1946-53 sales of this product in the United
States will increase by over 10,000%. America's production
costs in this very high-technology industry are now, in 1946,
below anybody else's and the quality of American production
is higher. The number of firms in the United States making
this eminently exportable product will multiply four times
over in 1946-53, and after 1953 the sort of growth in purchases
about to be experienced in the United States will eventually
spread to countries including more than two thirds of the
population of the world. You now have to decide whether to
put taxpayers' money into this industry (a) in 1946, (b) in
industry concerned, as you may have guessed, is that producing
television sets or major television parts in America. Even
in the boom years 1946-53 less than half of the American firms
sometime operating in this market ever showed a really healthy
positive cash flow, and in the five years after 1953 more
than three quarters closed down, increasingly on terms equivalent
to going bust.
this is not an exceptional case-except in so far as it was
an exceptionally fortunate one because the product called
television actually caught on. This is likely to be the usual
experience in today's go-go industries like microprocessors
or biological implants or laser technology or whatever new
product you will first hear of tomorrow. It has been the usual
experience in yesterday's went-went industries like airlines
or computer leasing or washing machines or real estate investment
trusts-even when there has been an incredible increase in
demand for their products. Correct forecasts for 1950-82:
passenger miles flown in airlines will increase by 3,200%,
and by 1982 all the biggest airlines will be going bust.
present trendiest policy of governments at the equivalent
of television's 1946 stage is to provide cheap loans to small
technological firms, thus ensuring that the number in the
market multiplies six instead of four times over, so 90% instead
of 75% eventually go bust.
the 1953 stage the problem is not just that the domestic market
is going over to replacement demand. The problem is that the
industry is now established, so a Taiwan without trade unions
and lower wages may take it over. What you do as a taxpayer
at the 1953 stage, with far too many firms in the market,
is scream because your equivalent of a national enterprise
board will be introducing yet another one, since it has just
heard that an exciting new technological product called television
exists. What you do as a businessman is either (a) make money
by switching operations to Taiwan; or (b) stick to quality
control and follow the logical intrapreneurial policies for
mature (not infant) firms.
some good news for old countries, making old-fashioned things.
the beginning of this century the two largest occupations
in America and Britain were agriculture and domestic service,
together employing around half the workforce. Today these
two employ under 4% in each country, and until the 1960s it
seemed probable that manufacturing employment in the world's
rich north would drop the same way. Now the success of Japan,
and the discovery small is more flexible, are good news for
Europe's and America's manufacturers.
a multimillion-dollar factory with 10,000 men can produce
more cheaply in Brazil than in Birmingham, the multimillion
Eurodollars will roll to Rio, but probably not the $50,000
for a five -man Brazilian workshop lest the five and the $50,000
disappear to the bush. In my 1976 survey I argued that robots
and computer-controlled manufacturing systems should make
rich countries' manufactories smaller and more intrapreneurial,
dreaming that some might become one-man workshops. This proved
to be underdreaming since some Japanese small businessmen
now have no-workman garden worksheds, where their unwatched
leased secondhand robot system hammers out a component for
some big factory, while the small businessman is touting entrepreneurially
on the golf course for new orders.
Japanese have always based their continuing manufacturing
miracle on tiny entrepreneurial component-makers (one Japanese
worker in six now owns a small business) and on surprisingly
small but brotherly profit centres even within huge plants.
To quote Harvard University's Professor Ezra Vogel:
essential building block of a Japanese company is not a
man with a particular role assignment and his secretary
and assistants, as might be the case in an American company.
The essential building block of the Organization is the
section. A section might have perhaps eight or 10 people.
Within the section there is not as sharp a division of labour
as in an American company. To some extent, each person in
the same section shares the same overall responsibility.
you go into a Japanese assembly-line factory, you first see
the components flowing in (maybe from those automated no-workman
garden sheds), and subjected to very tight quality check.
At each stage along the automated assembly line, most of the
regular workers are also just reading dials or otherwise checking
for quality, usually in those co-operative sections of about
eight men. The section is told at its daily post-breakfast
meeting how many subsequent faults were later found in its
checked products, compared with the allegedly larger number
of faults missed by the equivalent section in a main rival
company (loud banzai).
the end of one Japanese hi-fi-set assembly line near Osaka
I once found a rather jolly crew actually doing manual work,
packing the awkwardly shaped sets into cardboard boxes. They
were not wearing Company uniforms. It had been decided that
this measurable manual work, right there on the assembly line,
could be contracted out to a separate tiny firm (virtually
a workers' co-operative). Question: who decided how many workers
should be on this job, and thus their working hours and income
per head? Answer: the workers themselves, like my Typists
Revans's action learning
Japanese have become the world's best businessmen partly because
they do not go to business schools. Indeed, they wisely do
not believe in off-the-job government-subsidised training
programmes for absolutely anything. One foreign management
academic mentioned in Tokyo with real respect is the English
Professor Reg Revans of the Manchester College of Science
and Technology, of whom I had never previously heard. Since
corresponding with Mr. Revans (who teaches that "the
sudden decline of the English-speaking economies of Britain,
Canada and the United States is partly a consequence of the
rise of the academic business schools"), I see why his
articles do not frequently appear in business school publications-although
his 900-page hardback "The origin and growth of action
learning" is about to be published in Sweden with help
from Lord Weinstock and others.
Revans's own system of "action learning" is to put
a small (I would call "intrapreneurial") group of
four or five people into the field with a mandate like "make
the business side of that hospital more efficient", all
the time recognizing:
managers learn with and from each other as they work together
on real problems (or opportunities) for which no course
of action (let alone solutions or policies have yet been
agreed; since the problems are real, it is insufficient
that the manager should discuss or diagnose them without
also taking steps to treat them. An action learning project
is thus a sustained and iterative attack, conducted in parallel
with three or four others, upon a real problem by a real
manager, regularly meeting his three or four colleagues
to offer and receive advice, criticism and support about
the diagnosis and treatment of the problem....
is clear that these groups have some times brought real advances-for
example, they helped to breed the supposed Japanese idea of
"quality circles"-a well as being schoolmasters.
A main difficulty is that real reform program generally require
what Mr. Revans calls two dimensions: (a) the recognition
that some particular activity needs to be ended, and then
(b) a tremendous fight against those to be supplanted who
have acquired reputations as experts in the prosecution of
what needs to be wound up. We are approaching the problem
of making lame ducks fly. Two that did:
of the few top 500 American companies to have grown in the
past two, decades was in 1960 the largest flour miller in
the world. Pause to ponder whether you would expect this to
be an expansive business, and what you would, advise it to
do with its flour mills. Answer: not expansive, and this firm
prospered mightily by closing half the flour mills in America
down. It got out of businesses making 40% of its previous
revenue, and split into more than 6 separate companies, some
doing very different things.
question: would you a expect corporate planner to recommend
some thing like that? Answer: no, all of the executives involved
in the 40% of existing businesses to be scrapped would be
up in arms, and even the Archangel Gabriel could not sensibly
suggest today that the company should go forthwith into the
following 60 lines of business. So the company did what I
think is the first essential thing in corporate planning:
it sacked its corporate planner, and set up small "developments
department". It decided that its strength was marketing
consumer products (it had early been successful in advertising
and selling some breakfast goo). Then it invited proposals
for small ventures based on this strength.
new businesses have ranged from fashion goods through toys
to restaurants. A spectacular example was that a film buff
had heard that a film was being made which needed to find
ways of getting more finance but looked as if it might become
a cult among kids across the world in the five- to 12-year-old
age group. Intrapreneurial question: what do we do? Answer:
buy the franchise for toys with the film's name, and advertise
in the trade press for small firms to submit particular toys
which, if they passed the company's quality test, would carry
the insignia. The film was called "Star Wars". Revenue
went from nought to $100m in one year.
tale. When I last talked to a meeting of this company, it
seemed to have developed a matrix Organization chart (which
Reg Revans rightly calls a device for repudiating responsibility),
lots of group vice-presidents in charge of different divisions
named after products (which is exactly the wrong concept),
a habit of buying existing businesses instead of creating
ideas (oh dear).
second rescue story has been in Italian textiles, where one
of that country's evanescent governments devised the best
possible industrial policy partly by mistake. Previous governments
had imposed bureaucratic controls on all companies, so this
one said that any firm with fewer than 20 workers would be
free from these. Of the 15,000 textile factories in the main
textile town of Tuscany, 13,000 have fewer than 10 employees.
One minister for industry who helped to spur this system was
the professor who had translated my 1976 survey into Italian.
industry now has just about the highest textile wages in the
world, and the frontier between the boss and worker moves
all the time, because if the small works of which you are
main owner fails you turn into being a friend's worker for
a time. And this is not just one freak way of running an adaptive
textile industry. In continually changing industries-which
in future may mean all industries-it is increasingly going
to be the only way, although the relation to the small producing
unit of the big-firm-buyer doing the quality checking will
most readers of this survey are not Italian ministers of industry,
let us consider some profitable intrapreneuralism which quite
junior businessmen reading this could initiate with one memo
now. Since the advent of competitive air fares, there have
been -five possible ways for a firm to run its executives'
air travel, and most very big companies still choose one of
the two craziest. Take your pick:
A, contract travel arrangements out to a travel agency which
is paid on a percentage commission so that it gets most money
when executives go by the most expensive way.
B, set up some underemployed secretary as a profit centre
to ferret for cheaper fares. You tell any executive who has
to travel on the firm's business whether his entitlement is
economy-class fare or first-class fare. Then if he arranges
with the secretary who has turned herself into an expert on
cheap fares to go a cheaper way, they split the saving-say,
one third to the company, one third to the traveler and one
third to the secretary as profit centre.
C, let as many secretaries or hall porters or whatever as
want to play this game set themselves up as competing profit
centres. Let them either co-operate or compete with each other,
as they please, but with the quite simple check the company
accountant pays the bucket-shop's air fare for £9O,
there is a note saying Mr. Smith's entitlement will usually
be a fare of £390, the company takes; £lOO of
this £3OO saving, and returns £2OO for the other
two to split among themselves as they like-licences withdrawn
if the travelers don't arrive on time.
D, give the money to the executives, and let them buy their
own fares-cheaply, if they wish. .
E, set up a central department, bullying executives to go
to Hongkong by standby Aeroflot flight 'via Iceland and Irkutsk.
least sensible systems are A (the travel agency) and E (the
central travel department), so most very big British companies
use one of them. The disadvantage of D ("give them the
money") is that executives then travel too much and use
the firm's time to hunt bargains. The most competitive system
is C (the co competing profit centres), but go via B (the
single profit centre) first and try to develop op into selling
this service outside?
I would like such business to develop through lots of groups
"secretaries intrapreneurial", trying sell lots
of services outside including t use of capital equipment that
in many offices lies idle for 150 of the 168 hour week. For
example, many firms have "infotech" (in America
"rapifax": facsimile transmission by telephone)
devices connected with their branch offices abroad, sometimes
into foreign countries which don't have Saturday mail deliveries
when you won't be using your infotech anyway. Test launching-an
advertisement saying contact a recorded message on your ansaphone
detailing your services on offer?-could cost virtually nil.
all these prospects lies the present advance of the computer
in completely inefficient underuse. Data processing departments
are being given the incentive to do as little work possible,
and top management over age 50 does not press them because
it hates revealing that it does not understand computers anyway.
The computer age has therefore started without most big organisations
having a daily and imaginative productivity hunt to discover
how the computer can best be used.
mess is worst in the world's biggest information-handling
industry, which is government. If you talk to a seminar of
(eg) senior British inland revenuemen you find that they are
engaged in commissioning meaningless "feasibility studies"
on how to computerize pre-computer systems of operation without
anybody thinking (let alone testing intrapreneurially) how
changing the system to fit the computer age could remove the
need for two thirds of the unnecessary labour now being done.
road to efficiency in all government offices could be paved
by the simplest sort of intrapreneurialism. You divide people
into groups of under 10; tell them that this is the work to
be done by them, and that if (in association with the computer
people etc.) they can cut the time spent on it, then they
can have the advantages of a "Typists Intrapreneurial"
(the flexitime, the self-organisation, the opportunities for
outside income). Savings would eventually be huge.
say that all this is white-collar stuff, and how could intrapreneurial
work in (eg) some heavily trade-unionised British business
going bust? Answer: in Britain, and many other countries buy-outs
by employees of bust and heavily trade-unionised businesses
are now proceeding fast.
a big company closes a loss-making subsidiary, it often finds
that redundancy costs etc. make the net proceeds on liquidation
derisory, so the opportunity arises for a small group of workers
to buy the firm for a knockdown price. Sometimes a big company
will also sell subsidiaries that do not fit its "overall
strategy". Since any company which uses that phrase will
have been managed absurdly, these can be better buys still.
In 1977 an American company sold a large British factory for
£350,000 to two top employees who had only £12,000
capital between them. The two borrowed £100,000 from
two overseas distributors, plus another £100,000 from
a bank; and persuaded the selling company to accept the other
; £l5O,OOO on deferred terms (and also to retain a 5%
equity stake). Efficiency and profits soared.
was clear from answers to a questionnaire in a recent do-it-yourself
booklet on Management Buy-Outs by The Economist Intelligence
Unit (EIU Special 115, price £30 or US$60) most big
British banks and near-banks are now eager to handle this
suddenly booming buy-out business. The recently renamed National
Enterprise Board will be losing taxpayers' money on it (it
told the questionnaire that its object was to assist "companies
in advanced technology and companies in English Assisted Areas
whose requirements cannot be met appropriately . . .",
oh dear), but all the other banks fortunately say they are
zooming in to make profits. The EIU's sample suggests the
failure rate in buy-outs is less than 10%, versus 30% in new
start-ups, even though the start-ups are in the ventures deemed
most profitable to start and the buy-outs in those which big
businesses want to shed.
familiar difficulty: buy-out teams should preferably be small
(the EIU recommends two to five) because more than six new
entrepreneurs quarrel. That problem can sometimes be assuaged
by halfway devolutions to separate small groups. One example
of such intrapreneurialisation under particularly unfavorable
conditions in the 1970s was a British film studio which ran
one year into a huge loss, because its workers spent most
of their days drawing large overtime while waiting around.
It was closed, and the workers were given redundancy money,
but some were asked if they wished to stay on to operate freelance
in what became a film facility studio. A producer who made
a film in the studio had thenceforth to negotiate separately
with the intrapreneurial cameramen (who were intrapreneurially
doing outside jobs in shooting television advertisements),
with the plasterers, carpenter's shop, lighting and electrical
men (who were also operating outside in the normal neighborhood
' For example, small teams at any two building trade), the
former transport department (now running a minicab service)
out on the rail
with the British nationalized industries, which were originally
created because it was assumed that large private monopolies
in them would too easily make excessive profits, but are now
all great stranded whales. The railway engine drivers of Britain
have some agreement, which no small firm could grant, so cheaply
so long ago. that an unnecessary two footplatemen should travel
on most trains where there is work for only one to do. A sensible
minority sign on to draw their wages but do not actually go
to these pointless journeys. They slope off to increase the
real national income by running their black-[economy minicab
services etc. This winter saw a rolling strike because British
Rail was trying to introduce a "productive deal"
through flexible rostering which-so long as it was accompanied
by promised of no redundancies-would achieve a net cut in
the national income by obliging the men to close some moon-lighting
groups of train drivers were organized like Typists Intrapreneurial
they could vote whether to make most money for themselves
by sacking their mates, whether to make least money for everybody
by retaining the present system, or whether to keep the mates
outside the trainings to run more intrapreneurial services
(eg, minicabs geared to meeting trains). Similar possibilities
for local authority dustmen (many of whom can complete their
existing jobs before ll am), turning coal pits into workers
cooperatives, right across the state sector. The intrapreneurial
improvements in productivity would likely be very large, because
the existing productivity of management and workers in this
sector is so unbelievably low.
example, small teams at any two or three partly unnecessary
British Rail suburban stations could then decide which stations
to close and sell, how and when to run car parks or jitney
services at or to those kept open, what best uses to make
of each square yard of British Rail's overabundant space (just
over a decade ago a survey showed that it owned 6% of the
land area of the then borough of Camden). Only a giant organisation
could be losing so much money when it owns so much underutilised
land bought so cheaply so long ago.
most large British workplaces there are no direct incentives
for ordinary workers to speed or improve production and no
way in which ordinary folk can have the fun of suggesting
(and participating in) constant experiments to improve their
group's efficiency. Except when they are frightened lest bankruptcy
may bring them the sack, it is therefore natural for most
British workers to resist productivity drives that disrupt
their habits at no benefit to themselves. The conventional
doctrine for running British industry is becoming the daft
one that a manager can best get higher productivity by running
his firm constantly on the verge of bankruptcy, and that his
workforce's main enjoyment of the loveliest human excitement
called group togetherness will be when going on strike.
most firms are less near to terminal illness than (eg) British-
Rail, they could often find the way forward to greater profitability
and more participatory workplace fun by starting intrapreneurial
ventures on a small scale (which is the right scale on which
to start them) and letting them spread. If these 1976 and
1982 surveys encourage any pioneers down that road, they will
be worth the aggravation that this sort of writing unhappily
manages to cause.