Page 139 - The Drucker Lectures

120 [ The Drucker Lectures

Very little of this has to do with automation, new machin-
ery. Practically all of it comes from reorganizing the workflow,
doing a more intelligent job of scheduling, of getting parts to
where they are needed, when they are needed. In other words,
it’s simply a matter of better management rather than of invest-
ment in machinery. The organization 15 years from now will be
very much flatter. GM has 28 levels of management today, and
you know the old rule we laid down in the ’40s that for you to
really judge someone’s performance, that person really has to be
on the job three to five years. And if you multiply 28 by 5, you
see that at GM you really have to be 140 years old before you can
be considered for senior management position—and sometimes
they behave like it.
For the last 20 years, I have been saying that I don’t know a
single large company where eliminating one level of vice presi-
dents, no matter which, wouldn’t double output. And, finally I’m
being proven right. The main reason is that in the traditional
organization, we did two things. First, by copying the command
model of the Army, we built in an enormous amount of redun-
dancy that you have to have on the battlefield. And, secondly,
we’ve used management levels as information relays. And as we
get to learn how to build information systems—and, believe me,
we are learning very fast—a good many of these levels of man-
agement will simply prove redundant. So you will get much flat-
ter organizations, which will also be organized far more on the
basis of direct responsibility.
But the single most important reason for the decrease in the
number of people who are on the company payroll is that more
and more of the work is going to be farmed out. You go back 30
years, and there was not one American hospital that farmed out
either its patient feeding or its housekeeping. Today, very few
American hospitals do either. Most of that work is farmed out.
And there are still quite a few colleges left that do their own