The boudaryless organization


General Electric’s former chairman, Jack Welch, coined the term boundary less organization to describe his idea of what he wanted GE to become. Welch wanted to turn his company into a “family grocery store� That is, in spite of its monstrous size (2004 revenues were in excess of $135 billion), he wanted to eliminate vertical and horizontal boundaries within GE and break own external barriers between the company and its customers and suppliers.

The boundary less organization seeks to eliminate the chain of command, have limitless spans of control, and replace departments with empowered teams. It relies so heavily on information technology, some have turned to calling this structure the T-form (or technology-based) organization.

Although GE has not yet achieved this boundary less state—and probably never will—it has made significant progress toward that end. So have other companies, such as Hewlett-Packard, AT&T, Motorola, and Oticon A/S. Let’s take a look at what a boundary less organization would look like and what some firms are doing to try to make it a reality.

By removing vertical boundaries, management flattens the hierarchy. Status and rank are minimized. Cross-hierarchical teams which include top executives, middle managers, supervisors, and operative employees, participative decision-making practices, and the use of 360-degree performance appraisals (in which peers and others above and below the employee evaluate his or her performance) are examples of what GE is doing to break down vertical boundaries. At Oticon A/S a $ 160 million a year Danish hearing aid manufacturer, all traces of hierarchy have disappeared. Everyone works at uniform mobile workstations. And project teams, not functions or departments, are used to coordinate work.

Functional departments create horizontal boundaries. And these boundaries stifle interaction between functions, product lines, and units. The way to reduce these barriers is to replace functional departments with cross-functional teams and to organize activities around processes. For instance, Xerox now develops new products through multidisciplinary teams that work in a single process instead of around narrow functional tasks. Similarly, some AT&T units are now doing annual budgets based not on functions or departments but on processes such as the maintenance of a world wide telecommunications network. Another way management can cut through horizontal barriers is to use lateral transfers, rotating people into and out of different functional areas. This approach turns specialists into generalists.

When fully operational, the boundary less organization also breaks down barriers to external constituencies (suppliers, customers, regulators, etc) and barriers by geography. Globalization, strategic alliances, customer-organization links, and telecommuting are all examples of practices that reduce external boundaries. Coca-Cola, for instance sees itself as a global corporation, not as a US or Atlanta company.

Firms such as NEC Corp., Boeing, and Apple Computer each have strategic alliances or joint partnerships with dozens of companies. These alliances blur the distinction between one organization and another; as employees work on joint projects. And some companies are allowing customers to perform functions that previously were done by management. For instance, some AT&T units are receiving bonuses on customer evaluations of the teams that serve them.

Finally, we suggest that telecommuting is blurring organizational boundaries. The security analyst with Merrill Lynch who does his job from his ranch in Montana or the software designer who works for a San Francisco company but does her job in Boulder, Colorado, are just two examples of the millions of workers who are now doing their jobs outside the physical boundaries of their employers’ premises.

The one common technological thread that makes the boundary less organization possible is networked computers. These allow people to communicate across intra-organizational and inter-organizational boundaries. Electronic mail, for instance, enables hundreds of employees to share information simultaneously and allows rank-and-file workers to communicate directly with senior executives.

In addition, many large companies, including FedEx, AT&T, and 3M, are developing private nets or “intranets.� Using the infrastructure and standards of the Internet and the World Wide Web these private nets are internal communication systems, protected from the public Internet by special software. And inter-organizational networks now make it possible for Wal-Mart suppliers such as Procter & Gamble and Levi-Strauss to monitor inventory levels of laundry soap and jeans, respectively, because P&G’s and Levi’s computer systems are networked to Wal-Mart’s system.