An interview with William Halal on applying principles of democracy and enterprise to your fleet operation

George Washington University management professor William E. Halal is widely recognized as a leading authority on institutional and economic change, strategic management, and emerging technologies. In his latest book, "The Infinite Resource: Creating and Leading the Knowledge Enterprise" (San Francisco: Jossey-Bass, 1998) 18 other thought leaders join Halal to consider the future of business organizations in the Information Age.

FLEET OWNER had the opportunity to talk with Professor Halal about the enormous changes he sees taking place and the new principles that will redefine organizations and businesses, including trucking.

FO: Why is the Information Revolution so unique, so unlike earlier technology-created turning points, such as the Industrial Revolution?

Halal: The Information Revolution is fundamentally different because it taps knowledge, a resource that is almost limitless and especially powerful. Unlike physical resources knowledge is constantly being created and the supply is inexhaustible, so it resolves the age-old clash over limited means.

We're witnessing the slow but steady flowering of a remarkably different world of boundless potential. The possibilities for increasing human capabilities, prosperity, and social progress are so vast that most people find them unimaginable, too good to be true.

It is also unleashing a tidal wave of change, however, that is transforming our entire social order. The significance of this cannot be overstated. A new age in management, institutions, and society is at hand.

FO: How is this impacting organizations today?

Halal: Major corporations comprise economic systems that are as large and complex as national economies, but they are still commonly controlled from the top down. Senior executives define strategic initiatives, set financial targets, and move people and other resources around. How does this differ from the centralized planning that failed under communism? Why would such control be bad for a national economy but good for a corporate economy?

It amazes me that we do not see the conflict with our democratic principles. Our daily working lives are typically spent in and hierarchical systems, which, ironically, are run by people who are among the biggest supporters of democracy and free enterprise - outside the corporation.

The growing complexity and turbulence of the knowledge era is applying great pressure to this hierarchical system, while demanding ever more creative, responsive, and flexible forms of internal enterprise. Pick up any business book or magazine these days and you see articles and case studies about the need for decentralized structures, self-supporting work units, entrepreneurial freedom, internal competition, and accountability to the customer at every work level.

This is creating a great deal of confusion. One of the biggest problems is that managers do not generally understand how to create a different breed of bottom-up entrepreneurial organizations. They also have a hard time believing that people would behave responsibly without direct control. The result is that today's interest in management innovation is often little more than fashion and good intentions. To make matters worse, the entire topic is often taboo because it involves the sensitive issue of power.

FO: If the current business structures are becoming obsolete, what will take their place?

Halal: There are three new "principles" or economic imperatives that will govern businesses and other institutions in the future. They're already impacting us.

Principle 1: Complexity is managed through freedom. Success is no longer achieved by planning and control, but through entrepreneurial freedom among people at the bottom.

Principle 2: Cooperation is economically efficient. Economic strength does not come from power and firmness, but out of the cooperative flow of information within a corporate community.

Principle 3: Progress is guided by knowledge and spirit. Abundance is not the result of material riches, but of understanding the subtle workings of an infinitely complex world. If we want to draw on the energy of the future, we need to define our businesses in terms of the resources of the future - the power of enterprise, community or collaboration, and knowledge. I call this new system "democratic enterprise."

FO: If a truck fleet were to become a "democratic enterprise," how would it be organized? How might it function?

Halal: For starters, I think that it might be useful for drivers to organize themselves into teams. This would create a "labor market" within the organization in which the driver teams would bid on loads, routes, or contracts. Work would be awarded based upon the performance of the team and the merit of their bid, which might include service considerations and even rates.

Under this system, drivers would have the freedom to work out problems among themselves, such as a team member's need to get home for a family event, hours-of-service issues, illnesses, personal preferences regarding trips, etc. Not only would this make their own workdays more satisfying, but by harnessing the energy and imagination of the drivers themselves, it would also open up new possibilities for innovation.

Other departments, such as maintenance, sales, or even dispatch, could sell their services to the driver teams. Think of maintenance, for instance, as a small, independent shop or group of shops. They might sell maintenance contracts to the driver groups, who would perhaps have their choice of two or three maintenance teams. Drivers might even have the freedom to take their work to outside service suppliers - to help keep everyone motivated and competing. The maintenance teams, of course, might also be free to sell their surplus time to outside driver teams.

Every group would have accountability and visibility for the work of their team. The success of this approach depends in part upon making all information visible so everyone can see what's happening in the organization.

Fleet managers' jobs would also change. For one thing, they'd be simplified. Instead of having to keep tabs on individual drivers, for example, managers would work with representatives from the various driver teams, and their primary job would be to design the system to enable all this to work for the benefit of customers, the company, and all the other stakeholders.

FO: What holds an organization like this together and makes it function as a unified whole?

Halal: The "collaborative community" is what holds it all together. A policy-making group of representatives from all functions meet to sort out differences and agree on structural principles. This is essentially the Saturn model that is in operation today.

Executives in this kind of organization become leaders instead of just "bosses." They demonstrate their genius and their worth by making the organization happen - by being able to communicate a vision where this becomes plausible, achievable, and real. It is also a more defensible role because it has moral authority. Executives are the stewards of their organizations.

Knowledge has altered the laws of economics to make this kind of cooperation efficient, which means that corporate community is not a social responsibility in the sense of doing good; it is a competitive advantage. And there's a corollary: If we accept the fact that working with employees, suppliers, customers, and even competitors is beneficial to the organization, then it follows that the mission of business must somehow encompass all these interests. It has to comprise a collaborative economic system that represents a better way of life for everyone involved.

I'm convinced that the application of our basic principles of democracy and free enterprise to corporate organizations will create the successful business model for the future. Nothing else can deal with the complexities of the knowledge-based business world that is so rapidly emerging all around us.

[Editor's note: Professor Halal has extended an invitation to FLEET OWNER readers to continue this dialogue. Please send your comments or questions to wrleavitt@aol.com.]