Table of contentsAbstract
The Transition and
Two Opposing Views
The New Management and
Workers and Managers
Summary of Competing
Abstract - This paper
is focused on a transformation that is well underway in the United States.
This transformation, which some have argued is as dramatic as the
industrial revolution, is changing the way we work and live in our
society. Sometimes generically called the information revolution, it is
driven by the integration of organizational processes though enabling
information technologies and systems. The outcome of the transformation is
unknown, but researchers and policy analysts have cast the problem in
familiar terms. On one side we have those who question the societal
benefits of technology and wish to limit its use, and on the other, we
have those who equate technology with progress and promote its adoption in
all areas. We provide two views from opposite ends of the spectrum to
frame our analysis. Even though we support technology advancement, we
don't enter this argument. Our focus is on the drivers within
organizations that are enabling the change that is displacing workers and
managers. Our research indicates that we are experiencing the natural
process of firms trying to gain competitive advantage by using new tools
and technologies, and those firms that don't pursue this route are
unlikely to survive. We show in some detail how firms are integrating
processes with new information technologies and systems, and discuss the
resulting implications for workers and managers. We also consider
competing views of the societal impacts of the information revolution.
Finally, we suggest some policy implications and avenues for further
1.0 INTRODUCTIONThe primary thesis of
this paper is centered on the following assertions:
1. We are in the midst of a transformation that may be as significant
as the industrial revolution.
2. Some of the drivers of the transformation are economic, but
Enterprise Integration, using enabling information technologies and
systems, is the primary driver.
3. The transformation is having an adverse impact on many workers and
managers, especially those who check the work of others and those who
transfer information or data without adding customer value.
4. Some workers are moving to new and perhaps more interesting jobs
within their existing organizations while others are being displaced.
This paper is focused on the drivers of the transformation, the new
work environment, and the effects on displaced workers 1. Our objective is
to present views about this transformation within the context of our
research and consulting work with public and private sector organizations
in the United States. This presents a bias that will cause some
international researchers to discount our ideas, but our modest
international work leads us to believe that the trend is not localized.
Since the transformation is enabled by the new evolving information
technologies, we risk revisiting old arguments about controlling
technology, but that is not our intent. We can't easily control these
technologies: The genie is out of the bottle. Our focus is on the
underlying forces that are driving this change within organizations.
Our position is that it is difficult to contain technology, and as the
technology diffusion process unfolds, there may be undesirable
consequences; e.g., employment dislocation, downsizing, or other
significant organizational transformations. However, we are optimists; we
believe that technology creates opportunities for positive social
transformation that exceed the undesirable consequences; e.g.,
environmental improvements, remote health diagnosis and care, distance
This paper is organized as follows. First we present a popular view of
how technology has enabled social change, focusing on the traditional
paradigm of agriculture, industry, and information. This historical
perspective provides the context for our ideas. Much has been written on
the history of technology. We are aware of the historical origins of our
arguments, and even if we don't enter the debate about controlling
technology, this argument provides the social framework for placing our
ideas in context. As noted by Rybczynski (1983), this is a polarized
debate. "On the one hand are the Boosters, for whom all
technological change represents progress, and who see any attempt to
control the future as a loss of nerve. On the other hand are the
Obstructionists, for whom any technical innovation is a threat, and
for whom controlling technology means gradually reducing, or at least
doing so whenever possible." To place our analysis in context, we present
the ideas of a modern-day Booster and a modern-day
As noted by White (1978) the origins of this debate can be
traced to medieval times, but the two above authors represent the modern
information technology-enabled reincarnation of the debate.
- Arno Penzias in his book Harmony: Business, Technology, &
Life After Paperwork (1995), and
- Jeremy Rifkin in his book The End of Work: The Decline of the
Global Labor Force and the Dawn of the Post-Market Era (1995).
After the presentation of the two opposing views, we move directly to
the primary contribution of the paper. We show how Enterprise
Integration is transforming organizations by examining three distinct
phases of development:
Following the discussion
of Enterprise Integration, we explore the resulting impacts on managers
and workers. Finally, we end with some ideas about how organizations of
the future might be configured and managed, and the corresponding
implications for government and society in general.
- The era of stand-alone and vertically oriented management and
- The era of process reengineering, and
- The era of Enterprise Integration.
2.0 THE TRANSITION AND TWO OPPOSING
VIEWSAlmost everyone agrees that our society is experiencing a period
of rapid change. It is difficult to understand the magnitude and rapidity
of this change because our reference point is one of relative stability.
That is, the last 50 years represent an outlier period in U.S. history, a
period of unusual stability. We are now moving into a period of relative
instability. Regardless of one's opinion, it is a fact that the 40 years
immediately following World War II represented a period of stable
organizational relationships in the United States. The U.S. emerged from
World War II as a dominant industrial power with almost monopolistic
control on many world markets.
As the world rebuilt from the destruction of World War II, the market
dominance of the U.S. was challenged. In addition, many U.S. organizations
were characterized by outdated and bloated bureaucracies. In short, U.S.
dominance had fueled complacency. Hence, much has been written about the
reactions of U.S. organizations to the reality of changing market forces.
The macroeconomic response to the changing business environment is one
driver of organizational change. While some organizations have reacted
through "slash and burn" downsizing, others have dealt with competitive
pressures by using enabling information technologies and systems. Even
though some would argue the point, we don't see technology as the driver.
The transition that we discuss is driven by market forces; the enabling
technologies provide organizations with a wider range of alternatives with
which to react and respond to the fundamental market forces.
It is this reaction that has led some authors to hypothesize that we
are entering a new age. For example, Dertouzos (1991) states: "The
agricultural age was based on plows and animals that pulled them; the
industrial age, on engines and the fuels that fed them. The information
age we are now creating will be based on computers and the networks that
interconnect them." The implication is that we are experiencing a new
information revolution, one that is as dramatic as the agricultural and
industrial revolutions. Furthermore, the effects of this revolution have
been uneven, having a dramatic impact in some countries and relatively
little in others.
Revolution or not, everyone agrees that organizations are in
transition. In the U.S., "Downsizing" and "Reengineering" are household
words, yet there is little understanding of what is causing the unsettling
change in organizations. Who is responsible for the resulting social pain
of unemployment and the transition to other (and perhaps lower paying)
employment? Is it cruel cost cutting senior management? Our research and
applied work indicates that the change organizations are experiencing is
inevitable, and in most cases senior management is only reacting to the
inevitable. The drivers of information technology-enabled organizational
change will be discussed in section three. To place these drivers in
context, we first present the polarizing frameworks which are used to
frame the debate. We could have selected from any number of authors to
provide this perspective, but we selected two authors who represent
opposite ends of the spectrum.
2.1 The Modern Booster - Arno
PenziasPenzias (1995) hypothesizes that we are poised on the verge of
a second information revolution. Despite enormous progress, modern
technology still falls short of fulfilling human needs. The threefold task
of harmonizing technology with people, with nature, and with itself
offers a challenging goal.
Penzias uses three phases of development to represent his ideas:
The era of quantity is associated the
mass production paradigm of the industrial revolution. The quality era in
the U.S. is associated with a relatively short period of history,
approximately the last twenty-five or thirty years. The period is
characterized by a focus on product quality in order to achieve
competitive advantage. In the U.S., the focus on quality was a reaction to
international competition, primarily from Asia. While the chronological
boundaries are blurred, Penzias suggests that we have already transitioned
from the quantity to the quality era, and we are currently in transition
from the quality to the harmony era.
- The era of quantity,
- The era of quality, and
- The era of harmony.
The transition to Penzias's era of harmony will shift the locus of
value from individual products to integrated service, with each customer
becoming a partner in value creation by participating in "design" at the
point of sale. The transition to harmony will bring greater coherence to
the value-creation process, with technology becoming more aligned with its
users and with the surrounding environment. Businesses and their employees
will shift their focus from internal matters to their customers.
Others have made similar arguments, but the differences between the
quantity and quality eras as elucidated by Penzias are summarized in Table
The comparison in Table 1 requires little discussion. The problems with
U.S. competitiveness and product quality were discussed extensively by
academicians and public policy analysts. Several significant works are
Cohen and Zysman (1987), Dertouzos, et al. (1989), and Magaziner and
Patinkin (1989). Thousands of popular management books on quality control,
TQM and Japanese management techniques attest to the fact that this
transition has occurred. While it may not have been clear at the time, the
Industrial Renaissance that was projected by Abernathy, et al.
(1983), has taken place. Companies have rethought the ways that they
manage operations, R&D, and marketing, and a new emphasis on customer,
cost, and quality has emerged.
Table 1. Comparison of the Quantity and Quality Eras
While interesting from an analytical perspective, the era of quality is
not our focus. We proceed under the assumption that this transition, while
uneven, has occurred in the U.S. It is the transition to harmony that is
more instructive for this paper. A comparison of the eras of quality and
harmony is presented in Table 2.
Penzias views the future as one in which organizations work together
with their suppliers and customers to add value to their products.
Organizational teams are extended to include suppliers and customers,
forming what are known as architectural organizations. Quality is no
longer a goal; it is expected, and the focus is now on convenience.
Customer feedback, a key ingredient of the quality era, is replaced by
personalization; i.e., mass customization, producing to customer order
with possible lot sizes of one. This type of coordination among customers,
suppliers, and organizations is enabled by integrated processes supported
by direct and integrated information access. Environmental concern is
enhanced at the level where organizational processes contribute on an
on-going basis to environmental renewal. In short, information
technologies and systems are used in previously unimagined ways to add
Table 2. Comparison of the Quality and Harmony Eras
Penzias argues that integration is the enabler of the transition from
the era of quality to the era of harmony. Integration and direct
information access, two components of the harmony era, will greatly reduce
paperwork, which provides an indirect benefit to the customer, and will
consequently reduce the positions that were centered around it. We have no
predictions about the era of harmony, but we believe that "integration" is
one driver of the current transformation that is occurring within
organizations, even though we are in the very early stages of this
transformation. Penzias presents integration in very general terms. The
contribution of this paper is that we present integration in very specific
terms (section three), demonstrating why it is unlikely that the
transformation can be controlled.
Penzias provides little insight into the problem of worker displacement
and re-assignment that will inevitably occur as we make the transition to
harmony. Penzias notes, correctly we believe, that many new opportunities
will be developed for those who have the skills to make technology more
accessible and user-intuitive. His discussion leads one to believe that
new opportunities will be available to other worker classifications, but
details are not provided.
2.2 The Modern Obstructionist -
Jeremy RifkinRifkin (1995) views the current information
transformation as the final Marxian struggle between labor and capital;
i.e., the devaluation of labor that is induced by capital substitution. He
quotes the following passage from Marx. Each technological
transforms the worker's operations more and more into
mechanical operations, so that at a certain point the mechanism can step
into his place. Thus we can see directly how a particular from of labor
is transferred from the worker to capital in the form of the machine and
his own labor power devalued as a result of this transposition.. Hence
we have the struggle of the worker against machinery. What used to be
the activity of the worker's labor becomes that of the machine.
This statement forms the analytical framework for Rifkin's
study of the information revolution.
Rifkin approaches the information revolution in the same way that a
subset of economists/sociologists/politicians have approached economic
adjustments due to technological progress. This is the heart of Rifkin's
In the debate over how best to divide up the benefits
of productivity advances, every country must ultimately grapple with an
elementary question of economic justice. Put simply, does every member
of society, even the poorest among us, have a right to participate in
the benefit from increases in productivity brought on by the information
and communication technology revolutions? If the answer is yes, then
some form of compensation will have to be made to the increasing number
of unemployed whose labor is no longer needed in the new high-tech
automated world of the twenty-first century. Since the advances in
technology are going to mean fewer and fewer jobs in the market economy,
the only effective way to ensure those permanently displaced by
machinery the benefits of increased productivity is to provide some kind
of government guaranteed income. Tying the income to service in the
community would aid the growth and the development of the social economy
and facilitate the long-term transition into a community-centered,
service-oriented culture. At first, Rifkin's proposal seems
unique. He argues that there are an insufficient number of private sector
jobs to absorb those displaced workers who don't have market-valued
skills. He also argues that since the government sector, in its diminished
role, cannot absorb these workers, a Third Sector should absorb
these workers. The third sector is comprised of non-profit community-based
organizations that are focused on volunteerism and community service. This
is distinctly different from government funded work programs that are
often described as "the Third Sector." According to Rifkin, the workers
would be employees of the "non-profit" sector, a rapidly growing segment
of the U.S. economy 2. The types of
organizations could vary tremendously; e.g., charitable, hospitals,
manufacturing technology transfer centers, etc. However, as indicated
below, they may not be fully compensated by the non-profit organization.
A closer examination shows that there is little new in Rifkin's
proposal. Rifkin's community-based sector is funded by the government.
Volunteers are paid "shadow wages" in the form of government tax credits.
Other non-employable people are given a government-funded "social wage," a
form of the "guaranteed minimum income hypothesis" that was espoused by
economists earlier in this century. The funding for such initiatives would
come through a variety of new tax programs, including a U.S. version of
the value-added tax.
We think that Rifkin's approach is flawed for several reasons. The
information revolution can't be cast in traditional Liberal/Conservative
terms; i.e., equity versus efficiency or more government versus less
government. Rifkin recognizes that the information revolution is having a
dramatic impact on the private sector, but he apparently does not realize
that the public sector will be equally affected. In fact, Rifkin's
Third Sector will be transformed as well.
The information revolution will affect paper-based transaction
processing in the same way that computer integrated manufacturing has
transformed the processing of production units on the factory floor. If
government and Third Sector offices process information (which is a
fact), they will be affected by the transformation. In our opinion,
Rifkin's approach would not survive in the long-run; it is a 1960s idea
applied to a 1990s scenario.
3.0 THE NEW MANAGEMENT AND WORK ENVIRONMENTSWe
move to the heart of the paper by providing a detailed explanation of how
and why organizations are changing. Earlier and similar observations were
presented by Morton (1990) and Dertouzos (1991). We reiterate some of
these general observations, but we extend this work by focusing on the
details of how information technologies are changing organizations. The
above authors were correct in noting that information technologies 3 would radically
change organizations, but the extent and the rapidity of this change were
not completely understood.
3.1 Enterprise IntegrationWe believe that
Penzias is correct in noting that Enterprise Integration is the
key. He presents the concepts of integration in general terms; however,
Enterprise Integration is an elusive concept that has little meaning to
most people. We will use a simple example to present our ideas on the
meaning of the concept. Our definition of Enterprise Integration is
comprehensive. Enterprise Integration is the integration of processes
across organizational and functional boundaries to provide competitive
advantage. The process of achieving Enterprise Integration includes all
managerial and technological factors that enable cross-functional process
integration. The end result is a customer-oriented management structure
with information systems that are formally linked to processes and the
integration of processes needed to establish/retain customer satisfaction.
We will present the concept using simple examples that relate to the
phases of enterprise transition that are presented in Figure 1.
Figure 1. The Phases of Enterprise Transformation
3.2 The Period of Isolated Stand-Alone
SystemsPrior to the 1990s, the information needs of an organization
were met by vertically aligned information systems that supported specific
organizational domains. Consider the simple example that is presented in
Figure 2. This picture describes three organizational domains: Sales,
Production, and Shipping. In former times it was common to have a separate
information system supporting each domain; i.e., "stovepipe" systems for
sales, production and shipping. It was also common for there to be limited
interoperability among the systems, and seldom any integration. In fact,
people (or organizations) often existed only for purposes of transferring
information from one system to the next.
For the customer placing the order, this implies that full information
about the order and its delivery is not available at the point-of-sale.
For example, someone in Sales would be unable to tell the customer exactly
when the order would be shipped. Also, the inability to integrate
information adds time to the customer order fulfillment process. This old
information systems paradigm is associated with the first phase described
in Figure 1, the age of stove-piped vertically aligned information
Figure 2. The Old Information Systems Paradigm
3.3 The Period of Process ReengineeringThe
transition to the second phase, as indicated in Figure 1, was driven by
the realization that process management could greatly reduce the time
required to respond to a given business need; e.g., fulfilling a customer
order. Hence, in order to reduce cycle-time in delivering the product to
the customer, organizations shifted their focus to managing by process as
opposed to vertical "stovepipe" domains. In our simple example, we focus
on the customer order process. This situation is depicted in Figure 3.
In figure 3, the customer order process does not contain all functions
within each domain, even though the management solution spans all three
domains. Some would argue that this concept is a reincarnation of the
industrial engineering methodologies of the 1950s, but never-the-less the
concept motivated a managerial revolution in the U.S. during the first
half of the 1990s 4. This period was
associated with the radical improvement (i.e., reengineering) of business
processes within organizations.
The purpose of Business Process Reengineering (BPR) is to change
business processes and cultures radically by identifying and implementing
new business practices. The focus is on redesigning processes with
information technology playing a supporting role. BPR was touted as a key
to corporate survival, providing the capability to respond to rapidly
changing customer expectations. The reality is that many organizations
used BPR to achieve cost efficiencies in their business processes, with a
secondary focus on increasing effectiveness. In most organizations the
targets of BPR were outdated and bloated processes and organizational
structures as well as archaic and often arrogant corporate cultures. The
advent of reengineering is often associated with the seminal work of
Hammer (1990), but in fact the ideas were being independently applied in
various forms within many U.S. organizations. The strategy followed by
U.S. firms in implementing BPR alternatives is presented in Figure 4.
Figure 3. Process Management by Core Process
The concept of a core process is essential for understanding Figure 4.
Core Processes "are those central to business functioning, which
relate directly to external customers" [Earl, (1994)]. The reengineering
strategy was to focus organizational resources on the core processes while
continually reducing overhead and underhead 5. The private
sector objectives were simple:
- Optimally allocate resources to "winning" products,
- Create an environment for continual change,
- Stay ahead of demand and the competition, and
- Shift resources from other corporate claimants to the core
Figure 4. Organizational Resizing Over Time
With hindsight, we can see that many organizations did not reap the
anticipated benefits of BPR, but the data must be evaluated with care. The
popular press reported BPR failure rates in the U.S. as high as 70-80%.
The reasons for these failures have been discussed extensively in the
literature, hence they are not repeated here 6. Many firms
implemented "slash and burn" downsizing 7 and called it
reengineering. There is mounting evidence that these firms obtained short
run cost savings, and perhaps a quick uptick in stock prices, but no long
term competitive advantage.
This paper is not about downsizing, a temporary phenomenon in our
opinion 8. We
are focused on fundamental technology-enabled organizational change.
Workers may be displaced, and cost savings may result, but the real focus
is increased competitive advantage through cycle time reduction. However,
whether it be reengineering or downsizing, the impacts on displaced
workers and corporate loyalty were real and painful. These impacts will be
discussed in another section, but first we complete the story by focusing
on the third phase described in Figure 1, the period of Enterprise
3.4 The Period of Enterprise IntegrationA key
precursor for understanding our concept of Enterprise Integration is to
first understand that Business Process Reengineering is a management
strategy. Its successful implementation is enabled by information
technology. Information technologists don't always communicate well with
business managers because they lack a common language. Figure 5 provides
insight into the conceptual barrier that often exists between managers and
Figure 5 is divided into two parts: A perspective that relates to
senior managers (the top half) and a perspective that relates to
technologists (the bottom half). Managers are very comfortable conversing
about certain views of the organization such as planning, management
structure, core processes, etc. Technologists are comfortable with other
views of the organization; i.e., information architectures, data models,
activity models, etc. A conceptual barrier exists because managers and
technologists don't communicate effectively across the views. In simple
terms, they don't often talk, and when they have the opportunity to talk,
they often don't speak the same language. In many organizations the
Information Systems department is perceived as just another necessary cost
Successful implementation of Business Process Reengineering
alternatives requires that the conceptual barrier be bridged so that the
managerial and technological views of the organization are integrated.
Activities are embedded in processes, data flows through the processes,
the organizational units (or people) are embedded in the processes; etc.
Successful implementation requires that all views be integrated with
managers defining the process and organization views, while technologists
define the data, activity, and other technology views 9. Furthermore,
there must be protection in the following sense. If mangers alter
organizational processes, which is the essence of Business Process
Reengineering, then discipline must be forced on the technologists so that
information systems can be eventually aligned with the reengineered
If the customer order process in Figure 3 is reengineered and the three
legacy information systems are realigned so that they support the process
as opposed to the individual domains, then there is potential for large
reductions in cycle-time. This improves customer satisfaction, adds value
to the customer, and reduces cost. This point deserves more attention
since it is the key to understanding why it has been asserted that many
BPR efforts failed. It is also the key to understanding why Enterprise
Integration is more likely to succeed. Consider Figure 6, which is Figure
3 with a single modification.
Figure 5. The Conceptual Communications Barrier
Recall that Figure 2. indicated three separate legacy information
systems, each supporting a single domain. In Figure 3, the domain focus
was changed to a core process focus. We suggested that each process should
be reengineered to maximum attainable efficiency, but we did not consider
further changes to the information systems. In fact, this was the strategy
that was followed by many U.S. firms. They reorganized on core processes,
reengineered their processes, but did not change their information
This was one of the reasons that so many U.S. reengineering efforts
were classified as failures. Managers were attempting to manage by
process, but their systems were still providing information by
organizational domain. In this simple example, it would still be
impossible to provide timely order information at the point of sale, even
with the managerial focus on process.
Figure 6. Process Management by Core Process with Supporting IS
Figure 6. indicates that the problem has been solved by implementing an
information system that supports the process, as opposed to the separate
This is the essence of Enterprise Integration. If the information system
supports the process, then there is no requirement for people to transfer
and check data at the domain boundaries. This is the transition that we
face: As we achieve Enterprise Integration we are going to eliminate
paper-based transaction processing in all of our organizations. Every
person who checks, re-enters, or transfers data is potential
non-value-added activity. They will be moved to other jobs or completely
removed from organizational payrolls as we enter the 21st century!
The point was dramatically made by Bell (1993):
The litany of jobs to be cut, announced by the leading
high-technology companies around the world in the past year and a half,
is tolling the knell of an era: IBM Corporation, headquartered in the
United States, 90,000; General Motors in the United States, 74,000;
British Telecom in the United Kingdom, 65,000; Daimler-Benz in Germany,
40,000; and Nippon Telegraph & Telephone in Japan,
33,000............the current huge layoffs are not just the
belt-tightening responses of many companies to cyclical hard times. On
the contrary, the layoffs are the most visible and painful symptom of
fundamental and permanent structural (non-cyclical) changes in the way
high-tech companies will conduct business in the 21st century. Thus,
many of the former employees, including engineers, may never get their
jobs back even once recovery is fully underway, because those jobs will
no longer exist. Enterprise Integration is driving this
dramatic change within organizations. The resulting social implications
are difficult to envision. Of course, the underlying and troubling
question is: Where will all of the people go? Will they make technology
more useful and friendly as suggested by Penzias, or will they go on the
public payroll as suggested by Rifkin?
4.0 IMPLICATIONS FOR WORKERS AND
MANAGERSThe implications for workers and managers are difficult
issues to address since so little data is available, and much of the data
that is available is suspect. However, there is an emerging picture.
4.1 Worker and Manager DisplacementFirst,
almost everyone agrees that there will be winners and losers. Those with
skills and knowledge that are valued by the market are doing quite well,
and there is consensus that this trend will continue. Those who are poorly
educated and have few skills (including communications skills) are going
to continue to suffer.
Employment displacement is not isolated to the factory. According to
Pearlstein (1994), an American Management Association (AMA) survey
indicates that "middle managers, supervisors, and even professional
employees are taking the brunt of downsizing. Although salaried workers in
general represent 40 percent of all workers, they accounted for 63 percent
of the reductions reported in the survey." The survey indicated that 47
percent of the AMA's 7000 member firms experienced reductions in their
work force. Pearlstein notes that 66 percent of the firms in the survey
were simultaneously downsizing and hiring during the sample period. "The
survey is the latest piece of evidence that the economy is continuing to
be roiled by major structural change and dislocation even as the level of
sales, profits, and employment continue to rise." It is suggested that
downsizing is no longer an event, but a way of business life. This trend
continued into 1995. According to Challenger, Gray, and Christmas, Inc. (a
Chicago based outplacement firm), more than 300,000 jobs were lost in the
first nine months of 1995 [Grimsley (1995)].
The group that will most likely be hurt the most are those workers who
currently "check" data and "pass" data at process interfaces. If processes
are integrated, we no longer need the "data handlers and checkers" who
gain their power by monitoring the interfaces. Workers who do not add
value to the customer will disappear. In the Enterprise Integration
literature, these people are known as non-value-added check stations.
These jobs have traditionally been clerical and mid-level management
positions. Grimsley (1995) reports that "salaried workers, particularly
middle managers, have been hardest hit, at a rate more than double their
percentage in the work force."
The implications for public sector workers are astounding. The number
of non-value-added check stations in government is staggering, in both the
defense and non-defense sectors. These are the workers who manually
process forms and claims within government agencies. If the organization
is integrated, and the information system is aligned with processes, data
should only be entered once. If it is entered correctly, there is no need
for checkers. We are in the early stages of this transformation in the
U.S. as witnessed by the strong push to electronic commerce within the
U.S. government. With Electronic Data Interchange (EDI) 11 and
Internet/Intranet technologies, many manually processed operations can be
eliminated while simultaneously reducing cycle-time and error rates.
Penzias is probably correct - We are going to transform the office in the
same way that we transformed the factory.
For those people who are displaced, unemployment has a number of
negative consequences. These are detailed by Moore (1996). First, there
may be a significant amount of earnings loss, both from not working and
from taking a lower paying job. Many workers have skills that are finely
tuned to their current employer and of little or no value to other
organizations. Consequently, they have difficulty finding new employment
at the same compensation rate. Prolonged unemployment also has
social-psychological effects such as feelings of inferiority which effect
the mental and emotional well-being of the unemployed.
We should point out that there are dissenting opinions concerning the
current employment opportunities. Jasinowski (1996) notes that "while
Americans have been busy berating our capitalist system with unbridled
enthusiasm, the U.S. economy has become the envy of the industrialized
world." There has been tremendous growth in the U.S. economy, and those
workers with the right skills and in the right fields are reaping the
benefits of this growth. Jasinowski argues that "there are too many
workers with inadequate skills struggling to fit themselves into an
economy that increasingly demands higher levels of education." Hence many
jobs are difficult to fill. "Some manufacturing firms are so desperate for
skilled assembly-line workers that they have taken to hiring professional
recruiting firms to help them find qualified applicants."
In addition, demographics are not working in favor of the U.S. worker.
As Jasinowski points out, "the baby-boom generation, combined with the
influx of women into the workplace and high levels of immigration, has
brought the largest increase in the supply of labor in American history.
Since 1968, the number of Americans seeking jobs has shot up by 52 million
workers, a factor which has had the inevitable effect of slowing wage
growth since so many more people were out in the market competing for
Finally, there are some scholars who believe that there is little
unusual about the employment uncertainty that many workers are currently
experiencing. The years following World War II have been characterized by
exceptional stability and job security, relative to earlier periods of
U.S. history. It may be that we are returning to a period of "normalcy" 12.
The point of this discussion is that our transition to the period of
Enterprise Integration is encapsulated in a complex macroeconomic and
demographic web. Even though the politicians in this election year are
making many claims and promises, the person who claims to have the easy
solution is misleading the public 13. Political
"spin" in an election year makes it difficult to get a credible
understanding of even the most basic concepts. The press interpretation of
the Stiglitz 14
report is a good example 15. Are average
wages for newly created jobs above the median? The answer is no, but after
reading the Stiglitz report, the New York Times reported that "Pay is
higher for New Jobs" created during the Clinton administration.
An understanding of the transformation will not be obtained from the
politicians. The transformation is being driven by more basic economic,
demographic, and technological enablers. Even though the demographics are
gradually shifting in favor of the worker, this transition is far from
over, and for the worker who is displaced to a lower paying job or
permanent unemployment, the consequences are very real.
4.2 The People Who RemainFor those who remain
(i.e., are not displaced), their view of the organization is forever
changed. The question of corporate loyalty, or the decline thereof, has
been discussed extensively in the academic literature, and such stories
are rampant in the popular press [see, for example, Allen (1996) or the
Economist (1993)]. The problem is not restricted to the private sector.
Barr (1996) reports that diminished loyalty is also a problem in the
The picture isn't completely grim. According to Penzias (1995), the
growing use of car phones, beepers, faxes and laptops are changing how we
work. The worker who sits behind a desk from 9 a.m. to 5 p.m. is
disappearing. Workers are increasingly mobile as new technologies allow
them to travel directly to the customer while still maintaining a
connection to the office and relevant up-to-date information. In fact,
Penzias claims that getting workers out of the office decreases the amount
of time they direct to internal demands and correspondingly increases the
time focused on the customer.
5.0 SUMMARY OF COMPETING VIEWSIn this
section, we will summarize competing views of the societal impacts of the
information revolution that is being enabled by Enterprise Integration.
Although there may be other alternative scenarios that merit attention, we
will concentrate on the following three possibilities:
- Current trends will continue. Those with market-valued skills and
knowledge will do quite well in the new technology-enabled business
environment. Those who have limited skills will move to jobs that are
less fulfilling and probably lower paying.
- The second possibility involves some modification of the first
trend. Those with market-valued skills and knowledge will do well, but
something will alter the trend for those with skills that the market
assigns less value. That is, some unanticipated factor or combination of
factors will open new opportunities that lead to fulfilling and higher
paying jobs for these workers, perhaps using the information
technologies that are made more accessible and user-intuitive by others.
- The third possibility is another modification of the first. The
workers with market-valued skills and knowledge will do well, but work
does not become available for those with skills that are not valued by
the market. The resulting dislocation would require massive government
intervention, creating work programs similar to Rifkin's (1995) third
5.1 Confounding FactorsJasinowski (1996)
has delineated many of the factors that make this analysis so difficult.
Demographic trends are one of the major confounding factors. For example,
the large influx of females into the work force has essentially been
realized. The same is true of the large numbers of minorities that have
entered the economy since the passage of the Civil Rights Act. Immigration
is difficult to predict, because it is very dependent on events that occur
outside U.S. boundaries. For example, consider the large number of
immigrants from Vietnam and El Salvador. These immigrants were war
refuges, and their arrival could not be predicted in advance. The
admission policies with respect to other classes of immigrants are
political and difficult to predict. However, we agree with Jasinowski
that, in general, the demographic trends tend to support a "tighter" U.S.
labor market, which would suggest a higher real wage.
The business cycle is another element that complicates the analysis.
Even though business cycles are difficult to predict, it is unlikely that
a down-cycle would have long-run impact on the transition that is
occurring within organizations. A depression-like collapse would have
major implications, but the current integration trend will continue, even
if some decisions are postponed because of economic considerations.
Economic downturns confound the data; i.e., it is difficult to identify
those workers who are let go during downsizing efforts to reduce costs, as
opposed to those who are displaced by Enterprise Integration. However, the
long-term trend will not be altered. As long as organizations can gain
competitive advantage by integrating their processes with enabling
information technologies, economic theory suggests that the integration
process will continue.
5.2 Analysis of PossibilitiesThe third
scenario, in our opinion, is the least likely alternative for the U.S.
There is little historical evidence to support Rifkin's views. Even if new
technologies created a massive underclass, the un-affordability of
Rifkin's solution would be a major barrier to implementation. Rifkin's
assessment of the problem and his proposed solution is controversial (by
U.S. standards), and we think that it is unlikely that implementation
would be politically acceptable.
We turn our attention to the other two scenarios. Moore (1996) points
out that as companies restructure around core activities, they tend to
outsource more. The companies that take care of these outsourced tasks
provide lots of "dead-end" jobs. This would seem to support a trend as
discussed in the first scenario with workers being released from well
compensated jobs only to move to jobs that are less fulfilling and pay
less. However, alternative one, the status quo, is difficult to accept for
two reasons. The first reason is weak, in our opinion, but it merits
stating. The history of technology development and implementation tend to
support the assertion that the new technologies will generate additional
job opportunities in other areas.
The second reason, there is much evidence that new user-friendly
products are emerging in the marketplace that are making new technologies
more accessible to wider classes of people. New graphical interfaces,
especially in the entertainment areas, are going to change the way that
the average citizen views computing systems and technologies. The Internet
is one example of a technology that has become easily accessible and
widely used across most sectors of society. Initially a tool for
sophisticated defense-related research organizations, the Internet is now
used by large corporations, small companies, schools, libraries,
individuals at home, and others due to the development of easy to use
products in this area. While far from being overwhelming, there is
mounting evidence that the new information technologies are going to
become increasingly accessible and available for most citizens to use in
work and recreational endeavors.
Perhaps our optimism is excessive, but we believe that Penzias is
correct, and the second alternative will prevail. However, we are not
naive - there will be losers. For those who are unskilled and have poor
communications skills, meaningful employment will probably not be
available. Even factory jobs require market-valued skills and knowledge in
the current work environment, and the situation is unlikely to change in
the future. We must find better ways to educate this classification of
workers so that they are able to develop the necessary skills to obtain
6.0 CONCLUSIONSDuring the 1980s, a
dramatic transformation occurred within U.S. manufacturing organizations.
The number of "blue collar" jobs has steadily declined as a result of this
transition. Penzias (1995) suggests that we are going to see a
transformation that is just as dramatic in the "white collar" occupations.
That is, organizational transformation through Enterprise Integration is
going to forever change organizational relationships. Those workers who
check the work of others, or pass data or information at process
interfaces, will be displaced from their current jobs.
If one accepts this premise, the social implications are obvious. What
are the consequences for the displaced workers, and will Enterprise
Integration widen the gap between the rich and the poor? We have argued in
this paper that the search for competitive advantage makes Enterprise
Integration inevitable. The precise implementation is not predictable, but
there is ample evidence that the transformation is underway.
The implications for displaced workers and managers are not
well-understood. The analysis and political arguments are bounded by views
of extreme optimism and pessimism. The views of Penzias (1995) represent
the optimistic end of the spectrum, while the views of Rifkin (1995)
characterize the other extreme.
Our research and experiences from working within organizations tend to
support the position of Penzias. The analysis is complicated by
confounding factors, such as normal responses to business-cycles and other
competitive pressures. In particular, in the U.S. the technology-enabled
transition to the period of Enterprise Integration has been occurring
during a period of significant downsizing. We make a distinct difference
between downsizing and organizational transformation through Enterprise
Integration. Both usually result in fewer employees, but Enterprise
Integration leads to increased effectiveness and sustainable competitive
advantage. Downsizing is a cost cutting response to competitive pressures,
often resulting in short-run gains in profitability, but little in the way
of long-run competitive advantage.
This distinction is extremely important for a proper understanding of
our major points. Downsizing is the elimination of people to reduce costs.
Enterprise Integration is a transformation of the organization to achieve
competitive advantage. Downsizing always leads to fewer employees;
Enterprise Integration may or may not. If the organization is growing,
employment could increase as processes are integrated with enabling
information technologies; e.g., Eastman Chemical Company. However, our
research indicates that decreases are more likely, especially if the work
is primarily paper-based transactions processing.
There is evidence that many displaced workers will use the new enabling
information technologies in other employment. Our argument is based on the
observation that these technologies are becoming more-and-more accessible
to non-technologists. Just as the graphical user interface has made
computing more user-friendly, there is evidence that we are moving to a
level that could be called: user-intuitive. As noted by Penzias,
"disemployed workers generally find work closer to the customer
interfaces, either in the same corporation, in other corporations, or as
We already see a transition to more exciting and meaningful work for
many displaced workers. However, there are winners and losers. Those with
skills that are not market-valued are not benefiting from the transition.
To date, the negative effects of the transition appear to be localized on
those with relatively less education; i.e., secondary school degree or
less. These people, in general, were dependent on the manufacturing sector
for employment. While there are many new and high paying manufacturing
jobs, the absolute number of manufacturing jobs has been declining. Also,
many of the new manufacturing jobs require skills that were not previously
Even though we accept an optimistic view, we agree that the prospects
for those workers who are unskilled are not promising. Many of the new
jobs require enhanced analytical and communications skills. While the
alternatives may change, it is currently unreasonable to assume that
people who can't read and write can be retrained for these jobs. This is
not a new problem. These people had difficulty in securing employment
during the quality era, and this situation is unlikely to improve in the
future. This is a societal problem that requires new solutions; the old
solution of sustained underemployment through government transfer payments
creates a safety net, but solutions are needed that result in long-term
and meaningful employment. These solutions are not obvious, and those
proposed to date in the U.S. have been politically controversial.
We end as we began. The genie is out of the bottle. Enterprise
Integration will transform organizations throughout society. As noted by
Dertouzos (1991), "closing the door to technological discovery so as to
avoid the societal pitfalls is unacceptable to the probing nature of the
Integration will be defined and explained in detail in a later section.
However, for context we note that Enterprise Integration is distinctly
different from the Japanese management models that penetrated the U.S. in
the 1980s. These methods, as described by Robinson (1990), are focused on
continually improving a fixed process. Enterprise Integration, as
presented in this paper, is a much broader concept.
2. Rifkin's concept may be unique to the U.S. We
don't fully understand the evolution of the non-profit sectors of other
developed economies, but this segment of the U.S. economy is significant.
3. We use the term "information technologies" to
encompass a wide range of information systems, technologies, networks,
computers, etc. that are enabling organizational transformation. This
choice of terms is for convenience; i.e., the relevant set of hardware and
software technologies are presented as a generic verbal package.
4. See, for example, Davenport and Short (1990).
5. Underhead is non-value-added middle management.
6. The preconditions for successful BPR
implementation are discussed by Bashein, et al. (1994).
7. The problem became so severe in the U.S. that a
new term, corporate anorexia, was added to the business vocabulary.
Corporate anorexia is a noun, describing a company's loss of effectiveness
due to excessive shrinkage through various cost-cutting measures
8. Because of bad press, there is already evidence
that word is disappearing from our lexicon. See the news report by Sands
9. A technical presentation of these concepts is
provided by Scheer (1992,1994).
10. In our interviews with Eastman Chemical Company,
we encountered precisely this problem. After reorganizing the corporation
with a focus on process and extensive process reengineering, the company
realized that it could not reap the full benefits of the change without
implementing a new system that supports the reengineered processes. After
a two year effort the integrating system was implemented. This was
confirmed in conversations with Mr. Robert Savell of Eastman Chemical in
May, 1996. Since the popular press has identified several hundred of these
large-scale implementations that are currently underway in the U.S., we
don't believe that the Eastman experience is that unusual.
11. Electronic Data Interchange is the
computer-to-computer exchange of routine business information in a
standard format between companies.
12. The authors acknowledge Prof. Henry Alberts for
his discussions on this point.
13. One only has to listen to the inflammatory
rhetoric from both sides of the political spectrum; e.g., presidential
candidate Pat Buchanan and Labor Secretary Robert Reich. Those who propose
simple solutions target callous business executives as the sole source of
displacement are not promoting an understanding of the transition that we
are currently experiencing.
14. Mr. Joseph Stiglitz is the Chairman of the
President's Council of Economic Advisers for the Clinton administration.
15. See Kuttner (1996).
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Thomas R. Gulledge is
Professor of Public Policy and Operations Research at George Mason
University and Director of the Policy Analysis Center within the Institute
of Public Policy. He lectures in the areas of Organizational Informatics,
Engineering Management, Economic Systems and Systems Engineering
Economics. His e-mail is firstname.lastname@example.org.
Ruth Haszko is a high school French teacher in New Hampshire. Prior to
her current position, she was member of the Research Faculty within the
Institute of Public Policy at George Mason University (GMU). In that
capacity she lead GMU's training activities at the U.S. Advanced Research
Projects Agency Funded Electronic Commerce Resource Center and worked on
research projects related to Enterprise Integration, Integrated Process
Engineering and Technology Transfer. Her e-mail is email@example.com.