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Trust and the Virtual Organization by Charles Handy ("HBR") May/June 1995

Trust and the Virtual Organization


How do you manage people whom you do not see?

by Charles Handy

Charles Handy is a fellow of the London Business School in London, England. He is the author of The Age of Unreason and
The Age of Paradox, both published by the Harvard Business School Press

his journal but would instead enter implications of what was being
Not long ago, I found myself in the it into the database of subscribing said.
Laurentian Library, which organizations. In that case, said
Michelangelo built in Florence for one of those present, we need We were coming face-to-face with
the Medicis nearly 500 years ago. It never visit a library again; we can the idea of the virtual library: a
is a special place, filled with the get all that we want from the library as a concept, not a place;
scent of learning; a place more screen in our room. At the an activity, not a building. For the
restful and more librarians, who were
uplifting, in many ways, accustomed to seeing
than the Church of San themselves as guardians of
Lorenzo, in whose a special place, the idea
cloister it stands. The was either frightening or
Laurentian is no longer exciting, depending on
used as a library, their ages and attitudes.
however. It is visited
only by tourists, and, as Libraries, whose lifeblood
for its contents, they is information, were
could all be fitted onto always likely to be among
one CD-ROM disc. the first to confront the
Was this, I wondered, a challenge and opportunity
symbol of what was of virtuality, but as
coming to all our businesses become ever
organizations? Their more dependent on
buildings turned into information, they come up
museums for tourists, against the same
their work on discs? And dilemmas. An office is, at
would we not lose heart, an interpretative
something thereby, because, for University of Virginia, added library geared to a particular
all their probable efficiency, another, the change is already purpose, and more and more of our
videoconferencing and cruising the happening; all you need to access economic activity is a churning of
Internet are not the same as the library is a password and a information, ideas, and
working in Michelangelo's library! modem. The library of the intelligence in all their infinite
Only the week before, in fact, I University of Dubrovnik was variety-an invitation to virtuality.
had been with a group of destroyed, someone else reported, It is easy to be seduced by the
librarians, discussing the future of but the gift of a computer technological possibilities of the
their modern-day libraries. terminal, linked to a host of virtual organization, but the
Computer screens and keyboards, foreign databases, more than managerial and personal
they agreed, were taking over from compensated. implications may cause us to
shelves of books and journals. A I watched the expressions of those rethink what we mean by an
publisher revealed that he was no in the room as they took in the organization. At its simplest, the
longer going to print and publish managerial dilemma comes down

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Trust and the Virtual Organization by Charles Handy ("HBR") May/June 1995

to the question, How do you radio program Today. For many facility and, indeed, to every
manage people whom you do not years, I did not meet my director, library in the world if need be. As
see! The simple answer is, By nor have I ever met any members in Dubrovnik, disaster can help us
trusting them, but the apparent of the production team. I leap into the future before we ever
simplicity disguises a turnaround in communicate by telephone from intended. What will hold our
organizational thinking. The rules wherever I happen to be, and my librarian back, however, is not the
of trust are both obvious and well contributions are often broadcast technology or the money both are
established, but they do not sit from remote, unmanned studios. It potentially available but the
easily with a managerial tradition is not in any way unusual. hearts and minds
that believes efficiency and control The Open University in Great of is staff and his political masters.
are closely linked and that you Britain, with counterparts all over hat's because what people cannot
can't have one without a lot of the the world, is perhaps the most see they often cannot
other. Organizationally, we have to ambitious example of a concept contemplate. Business is creeping
wonder whether a company is, in without a place. The Open along behind such exemplars from
the future, going to be anything University has a home base, to be the public sector. Large parts of
more than the box of contracts sure, but none of the students and organizations are now made up of
that some companies now seem to few of the faculty are to be found ad hoc mini-organizations, projects
be. Is a box of contracts a there. Its home base is merely the collated for a particular time and
sustainable basis for getting the administrative hub of an unseen purpose, drawing their participants
work done in our society, or is it and sprawling empire. Its business from both inside and outside the
not, in fact, a recipe for school is already the largest in parent organization. The projects
disintegration? For society as a Europe, although few of the often have no one place to call
whole, the challenge will be to students have ever met any of the their own. They exist as activities
make sure that virtuality brings faculty or any of the other not as buildings; their only visible
benefits to all and not just to a students. They used to meet at sign is an E-mail address. Inside
favored few. Organizations and, in short residential summer schools, the buildings that do exist, so-
particular, business organizations, using the campuses of more called hot-desking is increasingly
are the linchpins of society. That traditional universities. This year, common. In international business,
gives them responsibilities beyond however, the university has videoconferencing is the norm. The
themselves, responsibilities that created its first truly virtual trains in Great Britain double as
virtuality throws into high relief. summer school. The students will mobile offices, with the
participate from their homes or commuters doze interrupted by
The Virtuality Dimension places of work via E-mail, mobile the ringing of personal phones and
If one ignores the technology, phone, and videoconferencing. the bleeping of portable
there is nothing new, conceptually, They will never be together in the computers. One day soon, when
in the idea of an activity without a same place at the same time. The everyone has a personal phone, the
building as its home. Where technology has been provided by phone will no longer belong to a
information is the raw material of the university, which has place. That will be more
work, it has never been necessary thoughtfully included the mobile dramatically different than it
to have all the people in the same phone for students so that, as they sounds. We will be able to call any
place at the same time. A network sit with their computers beside one without knowing where they
of salespeople is the most common them, still connected to their land are or what they are doing. The
example-so ordinary and everyday telephone lines, they may converse office as the home of our
an example that we would not with supervisors. telephone with a secretary to
think of giving it such a grandiose answer it and a line plugged into
title as a virtual organization. Yet In my part of Great Britain, the the wall will be come an
salespeople operate on their own, central library in Norwich, serving antiquated and very expensive
out of no common place out of the eastern region of the country, notion. An office that is avail- able
sight but not, one hopes, out of burned to the ground last summer. 168 hours a week but occupied for
touch or, for that matter, out of The librarian is considering perhaps 20 is a luxury that
line. replacing the grand building with a organizations can ill afford. If
Journalism provides other network of tiny libraries in every there is an office in the future, it
examples. I myself fill an hamlet and town throughout the will be
occasional slot on the BBC morning region, each linked to a central

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Trust and the Virtual Organization by Charles Handy ("HBR") May/June 1995

more like a clubhouse: a place for perch on the edge of her desk we asked whether it would not
meeting, eating, and greeting, there was nowhere else. have been simpler and less
with rooms reserved for activities, Couldn't we have done this aggravating to everyone if he had
not for particular people. somewhere else? I said over the called us directly from the
hubbub. "Like at your home! roadside telephone booth where he
Virtuality, however, isnt always as "I wish we could, she said. had been parked. I cant do
much fun as it is supposed to be. A Indeed, I w ould do so much of my that, he said, "because they
room of one's own, or at least a work a lot better if I could do it wont refund any money I spend.
desk of one's own, has been the where it suited me. I could send it But its only pennies! I
executive security blanket for a down the wire just as easily from exclaimed. I know, he said, but
century or more. A sense of place home, or wherever, as from here. that only shows how little they
is as important to most of us as a trust us!
sense of purpose. E-mail and voice Since the lifeblood of libraries is
mail have many attractions, information, it's not surprising that Writ large, that sort of attitude
including immediacy, but they are they've led businesses in creates a paraphernalia of systems,
not the same as watching the eyes confronting virtuality. checkers, and checkers checking
of others. The loneliness of the checkers expensive and
long-distance executive is well Why don't you, then ?" I asked deadening. Some commentators
documented. Even office politics with surprise. have argued that audit mania (the
and gossip have their attractions, if Because they want me where they urge to have some independent
only as an antidote to the can see me. And she pointed inspection) is a virus infecting our
monotony of much of what goes on down the long room to where two society. It exists, they suggest,
in the name of work. Few are going men sat behind large plateglass because we no longer trust people
to be eager advocates of virtuality windows. They were the editors, to act for anything but their own
when it really means that work is she explained, and they liked to be short-term interests. That attitude
what you do, not where you go. able to see what everyone was becomes a self-fulfilling prophecy.
doing, to check the work, or to
The Managerial Dilemmas interrupt it whenever they needed If they dont trust me,
Like it or not, the mixture of to give out a new assignment. employees say to themselves,
economics and technology means The truth is," she said, they Why should I bother to put their
that more and more of us will be dont trust us. needs before mine! If it is even
spending time in virtual space out partly true that a lack of trust
of sight, if not out of touch. No Trust is the heart of the matter. makes employees untrustworthy, it
longer will our colleagues be down That seems obvious and trite, yet does not bode well for the future
the corridor, available for an most of our organizations tend to of virtuality in organizations. If we
unscheduled meeting or a quick be arranged on the assumption are to enjoy the efficiencies and
progress check. Most meetings will that people cannot be trusted or other benefits of the virtual
have to be scheduled, even those relied on, even in tiny matters. organization, we will have to
on video, and will therefore Oversight systems are set up to rediscover how to run
become more infrequent. We will prevent anyone from doing the organizations based more on trust
have to learn how to run wrong thing, whether by accident than on control. Virtuality requires
organizations without meetings. or design. trust to make it work: Technology
We will also have to get The other day, a courier could not on its own is not enough.
accustomed to working with and find my familys remote cottage.
managing those whom we do not He called his base on his radio, and The Rules of Trust
see, except on rare and the base called us to ask Common sense tells us that there
prearranged occasions. That is directions. He was just around the are seven cardinal principles of
harder than it sounds. I once sat corner, but his base managed to trust we should keep in mind:
with a features writer of a daily omit a vital part of the directions. Trust is not blind. It is unwise to
paper. She was interviewing me in So he called them again, and they trust people whom you do not
the newsroom, a place filled with called us again. Then the courier know well, whom you have not
smoke, noise, telephones, and the repeated the cycle a third time to observed in action over time, and
sweat of 100 journalists. I had to ask whether we had a dangerous who are not committed to the
dog. When he eventually arrived, same goals. In practice, it is hard

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Trust and the Virtual Organization by Charles Handy ("HBR") May/June 1995

to know more than 50 people that models of organization, in which are deceitful or malicious but
well. Those 50 can each, in turn, everything was divided into its because they do not live up to
know another 50, and so on. Large component parts or functions. At expectations or cannot be relied on
organizations are not therefore first sight, the new holistic designs to do what is needed then those
incompatible with the principle of for the units of the organization people have to go. Where you
trust, but they have to be made up look more expensive because they cannot trust, you have to become a
of relatively constant, smaller duplicate functions and do not checker once more, with all the
groupings. The idea that people necessarily replicate each other. systems of control that involves.
should move around as much and The energy and effectiveness Therefore, for the sake of the
as fast as possible in order to get released by the freedom within whole, the individual must leave.
more exposure and more boundaries more than Trust has to be ruthless. It is
experience what the Japanese compensates, however. To incompatible with any promise of a
call the horizontal fast track can succeed, reengineering must be job for life. After all, who can be
mean that there is no time to learn built on trust. When it fails, it is so sure of their recruitment
to trust anyone and, in the end, no because trust is absent. procedures that they are prepared
point, because the organization to trust forever those whom they
starts to replace trust with systems Trust demands learning. An select? It is because trust is so
of control. organizational architecture made important but so risky, that
up of relatively independent and organizations tend to restrict their
My title in one large organization constant groupings, pushes the core commitments to a smaller
was MKR/32. In that capacity, I organization toward the sort of group of what I call trusties. But
wrote memos to FIN/41 or PRO/23. federal structure that is becoming that policy in turn pushes the
I rarely heard any names, and I more common everywhere. A organization toward a
never met the people behind those necessary condition of constancy, core/periphery model, one that
titles. I had no reason to trust however, is an ability to change: If can, if practitioners are not
them and, frankly, no desire to. I one set of people cannot be careful, degenerate into a set of
was a "temporary role occupant, exchanged for another set when purely formal contractual
in the jargon of the time, a role circumstances alter, then the first relationships with all the outsiders.
occupant in an organization of set must adapt or die. The Nothing is simple; there is paradox
command and control, based on constant groups must always be everywhere.
the premise that no one could flexible enough to change when Trust needs bonding. Self-
really be trusted. I left after a times and customers demand it. contained units responsible for
year. Such places can be prisons They must also keep themselves delivering specified results are the
for the human soul. abreast of change, forever necessary building blocks of an
Trust needs boundaries. Unlimited exploring new options and new organization based on trust, but
trust is, in practice, unrealistic. By technologies. They must create a long-lasting groups of trusties can
trust, organizations really mean real learning culture. The choice of create their own problems, those
confidence, a confidence in people for these groups is of organizations within the
someone's competence and in his therefore crucial. Every individual organization. For the whole to
or her commitment to a goal. has to be capable of self-renewal. work, the goals of the smaller units
Define that goal, and the individual Recruitment and placement be- have to gel with the goals of the
or the team can be left to get on come key, along with whole. The blossoming of vision
with it. Control is then after the the choice of group leaders. Such and mission statements is one
event, when the results are topics will require the serious attempt to deal with integration,
assessed. It is not a matter of attention of senior management. as are campaigns for total quality
granting permission before the They should not be delegated to a or excellence. Such things matter.
event Freedom within boundaries lower echelon of human resources. Or rather, if they did not exist,
works best, however, when the their absence would matter. They
work unit is self-contained, having Trust is tough. The reality is, are not, however, enough in
the capability within it to solve its however, that even the best themselves. They need to be
own problems. Trust-based recruiters and the best judges of backed up by exhortation and
organizations are, as a result, character will get it wrong personal example. Anita Roddick
reengineering their work, pulling sometimes. When trust proves to holds her spreading Body Shop
back from the old reductionist be misplaced-not because people together by what can best be

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Trust and the Virtual Organization by Charles Handy ("HBR") May/June 1995

called "personal infection, pouring develops. You can almost watch there is our coach, who is
her energies into the the culture grow, and you wonder undoubtedly the main influence on
reinforcement of her values and how they could have worked our work. So you see, he
beliefs through every medium she effectively without it. concluded, "there isn't a simple
can find. It is always a dangerous answer to your question." A rowing
strategy to personalize a mission, Trust requires leaders. At their crew, I realized, has to be based
in case the person stumbles or best, the units in good trust-based on trust if it is to have any chance
falls, as the Body Shop nearly did organizations hardly have to be of success. And if any member of
last year after unfavorable managed, but they do need a that crew does not pull his weight,
publicity, but organizations based multiplicity of leaders. I once then he does not deserve the
on trust need that sort of personal teased an English audience by confidence of the others and must
statement from their leaders. comparing a team of Englishmen to be asked to leave. Nor can all the
Trust is not and never can be an a rowing crew on the river eight leadership requirements be
impersonal commodity. Trust men going backward as fast as they discharged by one person, no
needs touch. Visionary leaders, no can without talking to each other, matter how great or how good.
matter how articulate, are not steered by the one person who
enough. A shared commitment still can't row! I thought it quite witty The Organization's Dilemma
requires personal contact to make at the time, but I was corrected Racing crews row for the sake of
it real. To augment John Naisbitt's after the session by one of the glory, but it is not as clear what
telling phrase, high tech has to be participants, who had once been motivates the people in the virtual
balanced by high touch to build an Olympic oarsman. How do you organizations of business. Why
high-trust organizations. think we could go backward so: should the now smaller core of
Paradoxically, the more virtual an fast without communicating, trusted individuals give so much of
organization becomes, the more its steered by this little fellow in the their lives and time and talent to
people need to meet in person. stern, if we didnt know each other an organization that they work for
The meetings, however, are very well, didnt have total but do not live in, an organization
different. They are more about confidence to do our jobs and a that, significantly, someone else
process than task, more concerned shared commitment almost a owns, someone whom they almost
that people get to know each other passion for the same goal! It is certainly do not know and have
than that they de- liver. the perfect formula for a team." never met, because, for the most
Videoconferences are more task part, that someone is not an
focused, but they are easier and I had to admit it he was right. individual at all but an institution
more productive if the individuals But tell me," I said to him, who owned, in turn, by other
know each other as people, not is the manager of this team!" anonymous people.
just as images on the screen. Work There isnt one, he replied,
and play, therefore, alternate in after thinking about it. Unless That question had a clear answer
many of the Corporate get- that is what you call our part-time in times past. The organization was
togethers that now fill the administrator back in the office." the instrument of its owners, and
conference resorts out of season. Manager, he was reminding me, is the individual was the instrument
These are not perks for the a low-status title in organizations of the organization. The implied
privileged; they are the necessary of colleagues. and the legal contracts were both
lubricants of virtuality, occasions Well, then, who is the leader ? instrumental. The individual was a
not only for getting to know each That depends," he said. When hired hand, a human resource,
other and for meeting the leaders we are racing, it is the little chap employed to work the assets of the
but also for reinforcing Corporate who is steering, because he is the organization. Good pay, good
goals and rethinking Corporate only one who can see where we prospects, and a challenging job
strategies. As one who delivers the are going. But there is also the were enough for most. The human
occasional cabaret at such stroke, who sets the standard for resource, however, is now the
occasions, I am always surprised to all of us. He is a leader, too, in a human asset, not the human cost.
find how few of the participants way. But off the river, it's the That is not just refined semantics,
have met each other in person, captain of the crew, who selects it is the literal financial truth. The
even if they have worked together us, bonds us together, builds our market value of the top 200
before. I am then further surprised commitment to our goal and our businesses on the London Stock
by how quickly a common mood dedication. Lastly, in training, Exchange is on average three times

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Trust and the Virtual Organization by Charles Handy ("HBR") May/June 1995

the worth of the visible fixed intelligence (which in turn are businesses more into line with the
assets. In the case of the high-tech vested in the heads and hearts of businesses of continental Europe or
high fliers, it can be up to 20 people), cannot escape the Japan. Companies there,
times. If that means anything, it dilemma. One answer is to turn the paradoxically perhaps, are seeking
means that the market is valuing laborers into members; that is, to to give more power to the
the intangible assets many times turn the instrumental contract into investors as a discipline for the
higher than the tangible ones. a membership contract for the members and their management
Whether those intangible assets smaller core. Members have rights. and as a way of increasing the
are the research in a company's They also have responsibilities. financial base. The principle of
pipeline, the brands, the know- Their rights include a share in the requisite balance would suggest
how, or the networks of governance of the community to that all groups should meet
experience, they amount in the which they belong. No one can buy halfway, and they probably will, as
end to one thing: the people. a club against the wishes of its the world of business becomes
members. Major capital increasingly linked and
Those people can and often do investments and strategic interdependent. The concept of
walk out the door. Whole teams of initiatives require the agreement membership, when made real,
analysts nowadays shift themselves of the members. The terms and would replace the sense of
from one financial institution to conditions of membership require belonging to a place with a sense
another at the glint of a golden members' agreement. Their of belonging to a community, even
handshake or the lure of new responsibilities center on the need if that community were a largely
pastures. If laborers are worthy of to make the business grow, virtual one. A sense of belonging is
their hire, there is no reason to because without growth there will something humans need if they are
suppose that they wont go where be no striving and, ultimately, no to commit themselves to more
the hire looks better. The assets of point. Growth, however, can mean than simple selfishness. Families
the new information-based growth in quality, size, and family businesses know
corporations are, as a result, profitability, or desirability, and something about the sense of
increasingly fragile. It is hard to maybe in all four. People who belonging and the motivating force
measure assets in the present, think of themselves as members of collective pride in the family
harder still to gauge their future. have more of an interest in the tradition, as well as the
Investing in information-based future of the business and its responsibilities that go with
businesses will be even more of a growth than those who are only its belonging. Families, at their best,
gamble than it has been in the hired help. are communities built on mutual
past. trust. If the family could be
Giving membership rights to key extended to include key
The consequences of increased people is not the same as giving contributors, the sense of
gambling are predictable: Investors them ownership, but those belonging would be properly
will be in more of a hurry to get membership rights inevitably inclusive. Without some real sense
their money back; managers will diminish the powers of the owners. of belonging, virtuality looks like a
be under pressure to milk their Shareholders become investors very precarious state and a
assets while they still have them; rather than owners. They are perilous base for the next phase of
horizons will shrink; and the result entitled to a reasonable return on capitalism, whatever the economic
will be that, even if the assets their money a return that takes and technological advantages.
don't walk, they will wilt. Under the risk into account-but they are
those pressures, even inspired, not entitled, for instance, to sell Society's Dilemma
articulate leaders will be hard- the company over the heads of its An economy that adds value
pressed to hold the virtual members or to dictate to through information, ideas, and
corporation together. management, unless the financial intelligence - the Three I Economy
When laborers become assets, the returns start to evaporate. Major offers a way out of the apparent
underlying contract with the investors, however, who tend to be clash between material growth and
organization has to change. Trust long-term investors, might also be environmental erosion.
inevitably requires some sense of included in the extended family of information, ideas, and
mutuality, of reciprocal loyalty. the business. Such a shift in the intelligence consume few of the
Virtual organizations, which feed governance of the corporation earth's resources. Virtuality I will
on information, ideas, and would bring Anglo-American redesign our cities with fewer

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Trust and the Virtual Organization by Charles Handy ("HBR") May/June 1995

skyscrapers and fewer commuters, Talent in I some form or another fast as the opinion leaders in
making a quieter and perhaps a exists in all human beings; it only society. Business bas always been
gentler world. Our aspirations for needs to be detected and a major leader of opinion, but if
growth in a Three I Economy would developed. Naturally, early business minds its own business
increasingly be more a matter for education is crucial, but our future exclusively or if it takes virtuality
the mind than for the body. The should not be determined by the to extremes and becomes a mere
growth sectors would be education time we are 16. Work can be a broker or box of contracts, then it
in all its varied forms, health care, great laboratory of learning, and will have failed society. In the
the arts and entertainment, organizations, therefore, hold one end, its search for wealth will have
leisure, travel, and sports. As the of the keys to the future of destroyed wealth.
economic statistics show, the new society. But if they concentrate
growth is already happening, and their efforts only on their core
the organizations that deliver it members, they will be throwing
tend to be small groups of away that key. Who else will help
colleagues united by mutual trust. those who are outside the
Small, growing companies often organization -the independents,
serve today's young people, who the part-timers, and the small
aspire to better music systems and contractors and suppliers ?
computers rather than to faster Already, in the European Union,
cars or flashier clothes. The one half of the available workforce
younger generation also relishes is outside the organization, not in
employment in the new and freer full-time jobs. If organizations do
organizations. not embrace the concept of an
Not all people do, however. If the extended family and include their
Three I Economy is to take off in associated workers in their plans
the First World and thus give hope for their human assets, the
of a sustainable future to others, workforce will be-
everyone needs to be able to
participate. come increasingly useless to them
and to themselves. If a trust-based
Currently, there is in every country organization means trust for some
of the First World a growing and the old instrumental contract
underclass that knows little about for the less able, then trust will
the concepts behind the Three I become a dirty word, a synonym
Economy. For members of that for selfishness. Some see the
underclass, such concepts are a peripheral workforce as the
joke. They want hamburgers and responsibility of government - to
heating, not computers. In the train, to employ, or, if all else
short term, maybe, they should be fails, to support. Governments,
helped with their hamburgers and however, have their limits. They
heating, but they also need a hand can pass laws, they can regulate,
up into the Three I Economy. and they can sometimes find
Virtuality will be a recipe for a money to empower others; but
divided society unless we help they cannot and should not try to
everyone, and a society divided do it all themselves. They need
will not long survive. We have to help from the rest of society.
take from the present to ensure
our future, instead of borrowing The hope for the future that is
from the future to ensure our contained within the virtual
present, as most countries do organization will end in
today. disillusionment unless we can
Everyone has something to mobilize society to think beyond
contribute to a Three I Economy. itself to save itself. Governments
There is no unreachable group. in a democracy can move only as

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