121 Inventing the Organizations of the Twenty1irst Century:
Control, Empowennent, and
Information Technology
Thomas W. Malone
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Au CONTEMpORARY MANAGEtS stifling innovation and creativity by trying to micromanage their organiza tions? Or are they managing the~ ~!&,anizations like ~ m'!!1Y autonomous fiefdoms, failini 10 reap the benefits of one big company? Is empowering employees just a fad-or is it the only way to succeed in the future?
When and how to exercise control is one of the oldest and most difficult problems in management, and one of the central tasks of managers in the next century will be finding the right balance between top-down control and bottom-up empowerment. I These issues will not go away, because for the foreseeable future, the changing economics of communication and information technol ogy win guarantee that the right answers keep changing.
Just when one thinks one has found the tight balance, some new way of sharing information ~nd making dedNett: Reprinted from "Is 'Empowerment' Just a Fad? Control,
l)ecision'Maklng and Information Technology" by T. W. Malone
Slean Management Review. 38 (1997), pp. 23-35, by pennisslon of publisher. Copyright 1997 by Sloan Management Review Asso ciation. All rightS reserved.
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TransformIng the Organization sions becomes feasible, and one is thrust into a race with the rest of the industry to figure out how to exploit it.
In fact, the very notion of decentralization needs re vising. When most people talk about empowerment, they are thinking about relatively small shifts of power within a conventional hierarchical structure. To fully exploit the possibilities of the new information tech· nologies, however, we may need to expand the concept to include radically decentralized organizations. like the
Internet, free markets of all kinds, and sdentific com munities-ail models for new ways of organizing work in the twenty-first century.
The Effect of Informadon Technology on Organizational Structures
Though the issues are complex,l research suggests that a simple pattern underlies many of the changes that will take place. As improvements in technology reduce the costs of communication and coordination, decision-making structures move through three stages. In the first stage, when communication costs are high. decisions tend to be made by independent decentralized dedsion makers. For most of human history. most economic decisions have been made this way, in largely indepen dent tribes, vjlJages, and towns around the world.
As the costs of communication fall, if becomes desirable to concen· trate decision making in on.e place. where centralized dedsion makers can take a more global perspective than isolated local decision makers.
The economic history of the twentieth century has been. in large pan, a story of the centralization of economic decision making in large glo bal corporations. In fact, for many kinds of decisions, the substantial benefits of centralization are yet to be exploited.
As communication costs fall even funher. however. there comes a point at which conneaed decentralized dedsion makers can be even more effective than centralized ones. Sharing information with each other. these decentralized decision makers can combine the best information available anywhere in the world with their own knowledge, energy. and creativity. As the world's economy becomes increasingly depen dent on creative innovation and '"knowledge work," and as new tech nologies make possible the connection of decentralized decision makers on a scale never before possjble. exploiting such opportunities for local empowerment may well become one of the most important themes in economic history of the next century.
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InY!nting the
Organ~a/1Ons
of tilt TW!lItyjirs! Century
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Of course, many other factors affect the distribution of decision mak ing in organizations_ For example, competitive dynamics,
