When Alice Thornton took over as chief executive officer at
Cosmo Plastics, the company was in trouble. Cosmo had started
out as an innovative company, known for creating a new product
just as the popularity of one of the industry's old standbys was
fading, i.e., replacing yo-yo's with water guns. In two decades, it
had become an established maker of plastics for the toy industry.
Cosmo had grown from a dozen employees to four hundred, and
its rules had grown haphazardly with it. Thornton's predecessor,
Willard P. Blatz, had found the company's procedures chaotic
and had instituted a uniform set of rules for all employees. Since
then, both research output and manufacturing productivity had
steadily declined. When the company's board of directors hired
Thornton, they emphasized the need to evaluate and revise the
company's formal procedures in an attempt to reverse the trends.
First, Thornton studied the rules Blatz had implemented. She was
impressed to find that the entire procedures manual was only
twenty pages long. It began with the reasonable sentence "All
employees of Cosmo Plastics shall be governed by the following .
" Thornton had expected to find evidence that Blatz had been a
tyrant who ran the company with an iron fist. But as she read
through the manual, she found nothing to indicate this. In fact,
some of the rules were rather flexible. Employees could punch in
anytime between 8:00 and 10:00 a.m. and leave nine hours later,
between 5:00 and 7:00 p.m. Managers were expected to keep
monthly notes on the people working for them and make yearly
recommendations to the human resources committee about
raises, bonuses, promotions, and firings. Except for their one-hour
lunch break, which they could take at any time, employees were
expected to be in the building at all times.
Puzzled, Thornton went down to the lounge where the research
and development people gathered. She was surprised to find a
time clock on the wall. Curious, she fed a time card into it and
was even more flabbergasted when the machine chattered noisily,
then spit it out without registering the time. Apparently R&D was
none too pleased with the time clock and had found a way to rig
it. When Thornton looked up in astonishment, only two of the
twelve employees who had been in the room were still there. They
said the others had "punched back in" when they saw the boss coming.
Thornton asked the remaining pair to tell her what was wrong with
company rules, and she got an earful. The researchers, mostly
chemists and engineers with advanced graduate degrees,
resented punching a time clock and having their work evaluated
once a month, when they could not reasonably be expected to
come up with something new and worth writing about more than
twice a year. Before the implementation of the new rules, they
had often gotten inspiration from going down to the local dime
store and picking up five dollars worth of cheap toys, but now they
felt they could make such trips only on their own time. And when
a researcher came up with an innovative idea, it often took months
for the proposal to work its way up the company hierarchy to the
attention of someone who could put it into production. In short, all
these sharp minds felt shackled.
Concluding that maybe she had overlooked the rigidity of the
rules, Thornton walked over to the manufacturing building to talk
to the production supervisors. They responded to her questions
with one word: anarchy. With employees drifting in between 8:00
and 10:00 and then starting to drift out again by 11:00 for lunch,
the supervisors never knew if they had enough people to run a
particular operation. Employee turnover was high, but not high
enough in some cases; supervisors believed the rules prevented
them from firing all but the most incompetent workers before
the end of the yearly evaluation period. The rules were so "humane"
that discipline was impossible to enforce.
By the time Alice Thornton got back to her office, she had a plan.
The following week, she called in all the department managers
and asked them to draft formal rules and procedures for their
individual areas. She told them she did not intend to lose control
of the company, but she wanted to see if they could improve
productivity and morale by creating formal procedures for their
individual departments.
Alice Thornton wondered if she was now on the right track with her
proposal to decentralize the rules and procedures at Cosmo Plastics.