21st century AD

Chief Executive, The, June, 1992

CEO respondents to a Chief Executive survey outline the parameters of the 21st-century corporation. On the horizon, CE readers see quality-driven businesses with innovative ways to deploy crucial human capital. But how do they stack up now?

Given rapid advances in technology, shifting international trade patterns and the proliferation of even cross-border strategic alliances, there's little doubt that corporations are undergoing accelerated evolution. But what's the shape of things to come? What will be the business paradigm of the 21st century?

CEOs responding to a recent survey by Chief Executive posit as an ideal a customer- and quality-driven organization with a flatter management hierarchy. Also important, they say, will be an organization's sense of vision - its ability to deploy a shared sense of values in decision making - and its capacity to add significant value to products and services.

The survey compiled responses from 390 CEOs in industries including fabricated products, financial services, agribusiness and consulting. Thirty-nine percent of respondents' firms have annual revenues under $50 million, and 44 percent have revenues between $50 million and $500 million. Some 14 percent have revenues between $500 million and $3 billion, while only 3 percent topped the latter figure.

The survey asked participants to gauge the importance to their organizations of adopting criteria outlined in a CE article entitled "Reinventing the Corporation" (October 1991), by Jerry Wind, Lauder Professor and Professor of Marketing at The Wharton School, and Alfred P. West Jr., chairman and chief executive of Wayne, PA-based SEI Corp. In the article, Wind and West described 12 interrelated criteria they determined would be key to 21st-century enterprises. The authors postulated that among other characteristics, businesses of the future would be more entrepreneurial, faster in getting their products to market and less focused on engaging in the full range of "cradle-to-grave" business activities - from R&D to marketing and distribution.

In general, respondents to the CE poll perceive as less than critical the need to institutionalize the criteria formulated by Wind and West. Particular criterion received a "critical" designation only if a CEO assigned it a rating of nine or 10 on a 10-point scale.

Only four criteria were rated critical by more than half of the respondents: customer orientation (73 percent), value-added, quality focus (69 percent), flatter organizational pyramid (60 percent) and the ability to formulate and communicate to staffers a corporate vision (55 percent).

Perhaps most surprising, the survey revealed that relatively few chief executive officers (28 percent) cited as critical the need to build global organizations or those focused on satisfying shareholder needs (21 percent). These findings appear to contradict a number of corporate trends.

In recent months, many U.S. corporations have been rocked by shareholder revolutions seeking changes ranging from a greater control of day-to-day operations to a fuller disclosure of CEO pay packages. Moreover, conventional wisdom holds that corporate markets are undergoing rapid globalization. Indeed, 67 percent of respondents to a 1991 CE poll cited globalization as critical to their companies' success in the 1990s.

Meanwhile, CEOs also were asked how their firms stack up now against benchmarks of the future. A summary of the poll's findings follows.

CRITICAL FACTORS

Exhibit 1 summarizes respondents' answers to the question "We consider as a critical characteristic we should have." This was asked for each of the 12 characteristics.

It is interesting to note that being a global organization, a network organization or a stakeholder-focused organization is a key requirement of less than a third of all respondents. These findings are consistent with the respondents' assessments of the importance of the 12 characteristics, summarized in Exhibit 2.

Perhaps to be expected, the greatest mean percentage importance is given by the respondents to having a customer-driven organization. But somewhat surprising - in the flip side of a statistic from Exhibit 1 - is that 27 percent of CEOs surveyed did not rate the customer-driven characteristic as critical to their organization.

Respondents who defined their companies as "leaders" in the industry segment they serve had higher assessments of the critical importance of the 12 criteria. For example, while 71 percent of leaders think it crucial to flatten their organizations,

that figure dips to 56 percent among those who define their companies as "one of the top three but not the leader."

SMALL STEPS

Overall, most responding executives are not taking major steps toward achieving the desired changes in organizational orientation and architecture. Exhibit 3 reports the results to the question, "We are taking major steps toward

FREEZE FRAME

Respondents to the CE poll also were asked to rate the degree to which some specific aspects of each of the 12 characteristics describe their organization. Following below are the results of this self-assessment. * Cross-functional organization.