The last 30 years or so have played host to the emergence of huge multi-national companies. Companies such as Coca-Cola, Nike, Microsoft, Nokia, Wal-Mart, and Budweiser, - the list is seemingly endless. Times change and the second half of the 20th Century was no exception to that rule when businesses realised one important thing. Branding, . Consumer goods companies, since the early 1970s, have begun to shift the focus from product to brand. From then on, product development was to come second fiddle to image and prestige. I will go into more detail regarding this important development further on.
There are two definite types of business structure in use today. There are the older, hierarchical structures and the modern, flatter, more democratic and egalitarian structures favoured, perhaps unwisely, by the service, sector. The ultimate test of effectiveness for a particular business structure would be to look at those companies which are the most successful in the world. This led to me checking out Interbrand, and it's annually produced "Top 100 Brand" list for more information.
Interbrand, according to them at least, is "the world's leading branding consultancy specialising in a unique range of brand-related services and activities." Founded in 1974, asides from offering consultation, it prints a globally recognised list of the 100 most eminent companies in the world. Think of it, if you will, as a kind of "Who's Who" of the business elite. Interbrand's Top 100, which when read out loud sounds a lot like a Top of the Pops countdown, makes compelling reading - all those companies you'd expect are well up there, with Coca-Colatopping the list followed unsurprisingly by Microsoft. Quite what they're best at isn't clear - screwing people or raking in plenty of cash; a bit of both one would suspect.
After doing a bit of research and already having prior knowledge of both companies, I decided to use list dominators Coca-Cola and Microsoft as two examples of structure in relation to competitiveness. According to Philippa Hankinson, Senior Lecturer at Roehampton University of Surrey, in her paper "'An empirical study which compares the organisational structures of companies managing the World's Top 100 brands with those managing Outsider brands" hierarchical structures are giving way to relatively flat structures in the post-modern business world. Far from being a beneficial evolution, however, the report casts doubt on the axiom that more rigid, hierarchical, top-down companies are less successful than flatter, more horizontally-integrated ones.
Hankinson, when referring to these "outsiders", is discussing those companies that despite being well-known, failed to get into this haut monde list of lists. Comparing the two groups, Hankinson discovered that both had a higher than expected proportion of relatively flat structures. This appears to be the current vogue and confirms her assertion that Hierarchical structures do seem to be in decline. According to her research, there was no real, clear, decisive correlation between business structure and brand success. This is an interesting disparity between consumer goods and consumer services companies. Interesting because amongst the Top 100 companies that were service-based, 80% of them were hierarchical as contrasted with 39% of the "outside" companies. This revelation of sorts, confirms misgivings had by many prominent economists that flatter organisational structuring can produce stronger brands. The evidence certainly suggests otherwise. It is, however, worth noting that 73% of the surveyed managers from Top 100 companies in the consumer goods sector had the right sort of structure for success, as opposed to only 43% from outsider companies. As previously stated, the relationship between structure and success concerning consumer goods companies was practically non-existent. Given that these two sets of companies would therefore have similar structures, it raises questions over whether it's simply managers' perceptions of how well the structure works, rather than anything inherently good about the structure itself.
Microsoft Corporation was founded in 1975 by William.H.Gates III and Paul Allen. An amateur interest in programming led to the birth of a company which, in the last 25 or so years, has rapidly elevated itself to be the dominant market leader and of course custodian of the prestigious second place position in Interbrand's Top 100. A pity it is then, that Microsoft Word fails to recognise Interbrand in its not-so-excellent spell-checker. Microsoft is a type of hierarchy, the very nature of its business necessitates it. In a rapidly altering market place it's essential that its staff members, who apparently are the worlds finest, can remain adept and learn new skills. Microsoft implements amongst its staff a structure of skills; a triangle divided into four levels. Starting at the top is universal, then global, local/unique and foundation skills at the bottom. These levels equate skill with competency and rightly so. It's with companies such as Microsoft and other computer based firms that a rigid command system is imperative in order to get things done. With all this supposed expertise then, it is in my opinion, unforgivable that Microsoft time and time again release to the public sub-standard software. The board of directors' role then becomes questionable - image appears to be everything. Microsoft spends a colossal amount of money on advertising, ensuring that the vast majority of home computers are running its operating systems. It is feasible then that Microsoft have, like countless other companies such as Nike, built up a brand that far, far surpasses the product. The small detail of structure is then glanced over; if you've got this mega-brand, you can release what you want to the general public, regardless of quality and sleep easy in the knowledge that they'll lap it up. Microsoft appear to have adopted the guise of feudalistic barons and we, the consumers, are their serfs - those that shun Windows in favour of Linux are true radicals.
Let-ups in labour laws have meant that companies like Microsoft, Nike, Gap, Intel and IBM can now have their goods manufactured by contractors, many of whom are based overseas. Here the shift from product to image is blatant. The truth is; organisational structure at Microsoft is relatively unimportant. Freeing the manufacturing and development to contractors leaves the big-wigs at Redmond free to concentrate on the real product - brand.
Why forsake brand for product? The answer to this question could explain the growing trend for "temp" workers across the big companies. Manufacturing overseas is cheap - manufacturing in the USA is expensive - simple. Many critics have observed that Microsoft is quickly on its way to becoming an "employee-less company" and they're not joking. Who cares about structure after all when you're hardly employing anyone? Bill Gates has amassed a fortune of over $55 billion whilst almost 80% of his workforce is classed as "temporary".
Nike is a perfect example of a company that's organisation matters little to competitiveness. Nike has, especially over the past few years, been criticised for it's involvement in sweat shops across Asia. Nike is one of these companies almost totally dependent on brand. It uses its vast wealth to make Nike synonymous with sport via intense advertising and sponsorship. So much money is spent, the fact that some little Chinese kid has been paid perhaps $2 a day to work a sewing machine in the most abysmal conditions, goes straight over the heads of consumers. Competitiveness can be attributed to much more plausible elements than organisational structure then - essentially the company who can make it's product the cheapest (regardless of any ethical factors) and can thrust it's adverts under the nose of the consumer at any possible opportunity, is the company that is more competitive, more effective and, it seems, more likely to get in the Interbrand Top 100 company list.
Coca-Cola has been doing the rounds ever since John Pemberton accidentally concocted a drink made from water, sugar syrup, caffeine and Cocaine in 1886. It's gone from generating just $50 in its first year of sales, to a massive yearly turn-over of over $19 billion. Like most companies of its age and stature, Coca-Cola until recently had a hierarchical structure. Whilst still being a hugely valuable and desired brand name, flat-under sales and threats from rivals forced the company to rethink its modus operandi. Douglas Daft Chairman and CEO of Coca-Cola realised that it had to rethink its structure and change accordingly with the times. Here is an instance of where brand wasn't enough - either that, or they weren't branding in the right way. Sure, they hadn't promised to get an advert on the moon like their rivals Pepsi, but they're certainly no stranger to the game of mass commercialism. Go to any third world country and you'll see billboard after billboard proclaiming the delights of Coke. Daft proposed "...flatter structures organised around work processes rather than functions, may be better positioned to understand customer needs."
Hankinson speculates as to whether companies like Coke with long histories have had more time to "bed down" their management structures and adapt to any changes that have been necessary over the years.
I believe that today, there are many, many more important and complicated variables that ensure a businesses' success than organisational structure. It can be argued that the Top 100 companies are in this elite little clique because they've managed to adapt themselves to various fashionable managerial vagaries and despite, rather than because of structures, they have been able to maintain their unique positions. That's my opinion at least and I think the evidence goes some way to substantiating that viewpoint.