In a survey called
"The coming entrepreneurial revolution" in The Economist of December 25, 1976, Norman Macrae argued that "methods
of operation in business are going to change radically in the next few decades, in a direction opposite to that which most
businessmen and nearly all politicians expect". The survey aroused enthusiasm and infuriation in almost equal measure,
with invitations to lecture in more than 20 countries. Today Macrae updates his views on management methods that can make
even lousy businesses profitable, and those that are driving tighter organizations to the wall.
Big goes bust
The 1976 survey argued that the world was probably
drawing to the end of the era of big business corporations, because it would soon be seen to be nonsense to have hierarchical
managements sitting in skyscraping offices trying to arrange how brainworkers (who in future would be most workers) could
best use their imaginations. The main increases in employment would henceforth come either in small firms or in those bigger
firms that managed to split themselves into smaller and smaller profit centres which would need to become more and more entrepreneurial.
As so often with supposedly controversial journalism, this proved to be an exercise in tentatively forecasting
something that had already begun to happen a decade before, although it honestly was the opposite of what was being most widely
reported at the time. In 1976 the textbooks being most assiduously fed to business courses were still Ken Galbraith's. "The
new industrial state" and Jean-Jacques Servan-Schreiber's "Le defin americain", each of which was a bible to
the advocates of industrial policies then subsidising British Steels, British Leylands and Projects Concorde into growing
inefficiently larger and therefore irretrievably bust. These mergers were procreated on the thesis, explicitly stated by Ken
Galbraith, that markets had been replaced by planning in favor of big technostructures so that large organisations like Chrysler
or United States Steel did not lose money any more. "By all but the pathologically romantic", cried Ken Galbraith
in 1967, "it is now recognised that this is not the age of the small man". He believed that the most economic size
for business corporations in the future could be "'very, very large".
before these two books were -written and, instantly reached the best-selling lists, precisely the opposite trends had remorselessly
begun to occur.
By 1965 small workplaces were already out-performing big ones on almost
every count. Even in idealistic occupations, British hospitals with under 100 beds had between one half and two thirds the
sickness rates among nurses as hospitals with more than 100 beds. I got my saddest quote of the late 1970s from the manager
of a huge factory in Manchuria (though he could find echoes at Detroit, London Airport, Kama River): "During the period
of disruption by the gang of four many workers came only on pay-days, some carrying placards saying I was a fly on top of
putrescent meat. With 10,000 comrades here, it was impossible to check the absenteeism, pilfering and work-dodging that went
The biggest world political event since the 1960s is that communist countries
have proved less able than free-market ones to escape from inefficient giantism in state factories and farms, so they are
all going bust. In free-market countries managers are eventually more willing to lose face than their shareholders are to
lose money, but tough problems are arising as even capitalist giants slim.
Since the mid-1960s
the thousand biggest firms in the United States have as a group been sensibly reducing their labour forces, and more than
the whole of the 15m private-sector jobs created since then have come in smaller firms-the majority of the new extra jobs
at any one time being in firms less than five years old, even though more than half of new small American firms disappear
out of business in their first five years. Although survey dates are jumbled, the accompanying inadequate charts suggest the
same trend is accelerating even in manufacturing across the capitalist world. The present capitalist conjuncture is therefore
one where the bigger and more stable firms are running down their employment, while more than the whole of net new employment
is provided by small firms which, however, frequently go bust. Ow! And some thought needs to be given to ways of combining
the advantages of small firms within big ones.
Make departments minifirms
In my 1976 survey I suggested there would be two trends-in the most conventional of which, greater reliance
on subcontracting, I now think I was jejune. Subcontracting works only when the big firm has very tight quality control (as
have Marks and Spencer, big Japanese companies towards tiny component makers and the superbly entrepreneurial Italian textile
industry, see later). Subcontracting does not work when the big firm cannot measure what quality is, so that many management
consultants, public relations firms etc. are about to disappear because they are high-cost ramps.
second system I suggested in 1976 was that dynamic corporations of the future should simultaneously be trying several alternative
ways of doing things in competition within themselves, becoming what have later been called confederations of "intrapreneurs".
Two key concepts for efficient businesses here. First, the right size for each profit centre or intrapreneurial group-by which
I mean a group of friends working together in daily productivity hunt towards the same objective-is very small, probably not
more than 10 or 11 people, however dynamic your top management. Jesus Christ tried 12, and that proved one too many. Second,
firms should not pay people for attendance at the workplace but should pay competing groups for modules of work done.
Thus, if you need a typing pool, I have suggested it might be best to set up several competing groups of Typists
Intrapreneurial. You would offer an index linked contract to the group for a set period, specifying the services you wanted
in return for a lump-sum monthly payment. The typists would apportion the work among themselves, devise their own flexitime,
choose their own lifestyles, decide whether to replace a leaver by a full-timer or part-timer or whether to do her work and
keep more money per head. They could also decide whether to tender for extra paid work from outside. In offices with tomorrow's
equipment, there could, see later, be a lot.
A trivial example? By comparison with the
gains that can be made in other fields it is. Yet the EEC court of auditors has recently ruled that the proper output for
a typist is around 24 pages a day, and was upset that in some EEC departments the average, was only 12. In The Economist on
a print-day Wednesday, when we are feeling rather participatory, a top secretary will type around 60 pages. If some EEC departments
went over to that pace through being Typists Intrapreneurial, the stenographers could choose to work only one day a week for
the same weekly wage as now, or by slowing recruitment they could work for up to five times their existing wages for the same
present attendance at the office, or they could become five times more efficient. In practice, competition would ensure a
mixture of the three, and the scope in most other parts of the business and bureaucratic jungle is much vaster.
This survey will explore that wider jungle, starting from the intrapreneurial mechanisms needed to breed new
projects and going on through to those needed eventually to kill outdated ones (and make it participatory fun to send them
to South Korea).
About 85% of all the industrial R & D expenditure in the United States
takes place in 300 large corporations. It is done very wastefully.
About 70,000 patents are issued in the United States each
year. Of these, maybe 60,000 are never heard of again, because most are horse manure. There will be some hidden pearls among
it, and more could be found if patent offices were more intrapreneurial instead of often being inefficient government filing
offices, some not even properly computerised. Governments should establish competing intrapreneurial teams in patent offices,
compiling competing databases.
Of the perhaps 10,000 new patents a year round the world
that are used, only about 10-20 a year are for what the co-inventor of the ubiquitous integrated circuit, Mr. Jack Kilby,
calls "major" inventions things that change our lives. A list of the world's major inventions over the past 50 years
shows that big organisations claim to have discovered only around a third of them, and some of their claims are fibs. More
than two thirds have been discovered by individuals or small businesses.
inventors' list of the past 50 years turns alphabetically from air conditioning, automatic transmissions and ballpoint pens,
through jet engines and penicillin, to xerography and the zipper. The big companies' list runs more predictably through crease-resistant
fabrics, float glass, synthetic detergents. Note how these fit with corporate objectives; "We are a big textile or soap
company, so go for something capital-intensive". "We are Pilkington's Glass, and if we can beat plate glass by developing
float glass, then every motor car in the world will eventually pay us a royalty, so it is worth carrying on with research
into solving the last three problems in the way of float glass even through 12 consecutive years of negative cash flow."
Nobody should underestimate the tangible and intrapreneurial excitement among a tiny group of researchers
when such a big firm's opportunity presents itself. Sir Alastair Pilkington has described how his research group into float
glass was kept small enough to maintain total secrecy, so that experiments had been in progress for seven years before competitors
knew of them; how several of his team members, after working impossibly long hours, were carried away on stretchers suffering
from heat exhaustion; how 100,000 tons of float glass were made and broken before the great day which produced the first bit
they could sell. But, to quote Jack Kilby again, each invention presents a profile of opportunities and requirements, while
each company has its own profile of what constitutes to it an acceptable product. The probability that these two profile,
will coincide in any given case is not very high.
The result is that many big companies'
brilliant researchers are, in conditions of great secrecy, in their seventh consecutive year of smashing unusable float glass.
The Pinchot proposals
The most promising set of incentives
for R and D departments to stray down interesting byways has been suggested by Mr. Gifford Pinchot III of Mr. Bob Schwartz's
Tarrytown School for Entrepreneurs near New York, and they are being tried out by some clients of the new School for Intrapreneurs
run by the Foresight Group management consultancy in Sweden. I should have introduced Mr. Pinchot before, because he is the
inventor of the word "intrapreneurs", in a paper which paid kindly tribute to my 1976 survey. His description of
what is happening in semi-reforming big corporations:
Decentralisation alone is not enough.
In a hierarchical organisation, promotions can be won by special graces, loyalty to one's boss and general political skills.
Courage, original thought, and ability to observe the obvious do not necessarily lead to success. If we are to get really
good problem-solving in our decentralised corporations, we must introduce a system that gives the decision to those who get
successful results, not to the inoffensive. Such people will be willing to take moderate risks and will be more concerned
with achieving results than gaining influence. These are among the characteristics of the successful entrepreneur. What is
needed in the large corporation is not more semi-independent departments run by hard-driving yes men, but something akin to
free-market entrepreneurship within the corporate organisation.
His recommendations about
intra-capital, see the next two paragraphs, could prove one of the great social inventions.
Mr. Pinchot's proposals for R and D departments a researcher wishing to plunge intrapreneurially into some project would initially
have to risk something of value to himself; such as 10% of the costs of a project, up to 20% of his salary for the duration
of a project and two years thereafter. A committee within the company would then contract to "buy" completed research
in an intrapreneurial scheme for both cash bonuses and intra-capital. If a company makes $1m on a project, the intrapreneur's
share might be $100,000, of which only $10,000 might come in cash and $90,000 might come in intra-capital which the intrapreneur
can invest on the corporation's behalf in future R and D projects of his own choice. If he is successful again, his reward
will be another cash bonus (probably larger the second time) plus more intra-capital.
system, says Mr. Pinchot, motivates creative staff to think practically and frees their individual initiative. It minimises
politics and maximises performance as a criterion for advancement. It rapidly puts a portion of the company's R&D budget
in the hands of proven winners. It gives any good research staffer a strong reason to stay with the company, since leaving
would mean giving up control of his accumulated intra-capital.
My own variant of the Pinchot
scheme would put less emphasis on the idea of the company undertaking projects, more on it helping to farm them out, while
still rewarding the intrapreneurial inventor in Pinchot's way. To quote Mr. Ralph Landau (founder of Halcon International,
and one of America's most successful entrepreneurs), there are two stages in innovation: (a) the conception or invention of
a new or improved process, product or system; (b) the commercialisation of it. Stage (b), the commercialisation, will generally
cost between two and ten times as much as stage (a). This great expense of commercialisation for products that do not fit
a particular firm's "profile"–creates a danger. Intrapreneurialism in R and D will not go fast enough if it
becomes a device for regruntling touchy young Boffin by pretending to put his wheeze along the company's existing production
and distribution lines that are quite unfitted for it.
Which leads to supermarkets for
ideas. A big next vogue should be the sale of ideas telecommunicated between computer terminals. Everybody should have different
ideas on how to tie intra-capital into these and how the offering firm can sift for quality; but, once competing mechanisms
are established, sales of ideas should be decided intrapreneurialy, as sales of goods already are in firms whose salesmen
are virtually independent businessmen working on commission. Franchising extends this concept. The only sales element subject
to "tight central control" in such companies is the salesmen's expense account, which is therefore the one element
on which the central controller is always swindled.
A steel mill's eels
Mr. Pinchot's group at Tarrytown is soon going to establish in America the world's second school for intrapreneurs.
The first started when the Foresight Group (itself originally four intrapreneurial Swedes operating from their homes) in 1980
persuaded some Swedish client companies to announce on their internal notice boards: "any would-be intrapreneur come
to a meeting". In most companies 40-60 turned up, about equally upper-blue-collar and middle-management. The school wanted
2-4 from each company for the first course, each with a separate specific intrapreneurial idea. Twelve people lasted through
the first Swedish course, which consisted of six meetings-the first of a week, the next five each of three days. The course
tried to turn each fuzzy idea into a business concept, then into a business plan.
those first graduates in 1981 there are now emerging (eg) two use-of waste-heat projects (one man is pumping a steel mill's
heat into a pond that breeds eels, another a paper mill's heat and computer knowhow into some computerised greenhouses); a
man from a building company is making prefabricated concrete elevator shafts (likely to boom in Sweden because of new environmental
rules demanding too many lifts for the handicapped); and an Esso man is converting repair garages behind filling stations
(many of which are closing) into places to store and lease out do-it-your-self equipment. Some of these look more like the
creation of small new capitalists than intrapreneurial ventures, but Sweden's silly tax law (which is suspicious of the transfer
of forgone income to capital) makes intra-capital difficult.
It would be wise for all governments
to alter this sort of tax law. Other government policies "in favour of entrepreneurship" make less sense.
Nobody should be in favour of governments
granting special credit and other favours to small and innovative firms. If governments are ass enough artificially to increase
supply by granting special favours, Silicon Valleys are going to go quickly bust.
test case, suppose this is 1946. Here are some accurate market forecasts for the succeeding seven years for a product that
alters the living habits of over two thirds of the population of the world. In 1946-53 sales of this product in the United
States will increase by over 10,000%. America's production costs in this very high-technology industry are now, in 1946, below
anybody else's and the quality of American production is higher. The number of firms in the United States making this eminently
exportable product will multiply four times over in 1946-53, and after 1953 the sort of growth in purchases about to be experienced
in the United States will eventually spread to countries including more than two thirds of the population of the world. You
now have to decide whether to put taxpayers' money into this industry (a) in 1946, (b) in 1953.
industry concerned, as you may have guessed, is that producing television sets or major television parts in America. Even
in the boom years 1946-53 less than half of the American firms sometime operating in this market ever showed a really healthy
positive cash flow, and in the five years after 1953 more than three quarters closed down, increasingly on terms equivalent
to going bust.
Moreover, this is not an exceptional case-except in so far as it was an
exceptionally fortunate one because the product called television actually caught on. This is likely to be the usual experience
in today's go-go industries like microprocessors or biological implants or laser technology or whatever new product you will
first hear of tomorrow. It has been the usual experience in yesterday's went-went industries like airlines or computer leasing
or washing machines or real estate investment trusts-even when there has been an incredible increase in demand for their products.
Correct forecasts for 1950-82: passenger miles flown in airlines will increase by 3,200%, and by 1982 all the biggest airlines
will be going bust.
The present trendiest policy of governments at the equivalent of television's
1946 stage is to provide cheap loans to small technological firms, thus ensuring that the number in the market multiplies
six instead of four times over, so 90% instead of 75% eventually go bust.
At the 1953 stage
the problem is not just that the domestic market is going over to replacement demand. The problem is that the industry is
now established, so a Taiwan without trade unions and lower wages may take it over. What you do as a taxpayer at the 1953
stage, with far too many firms in the market, is scream because your equivalent of a national enterprise board will be introducing
yet another one, since it has just heard that an exciting new technological product called television exists. What you do
as a businessman is either (a) make money by switching operations to Taiwan; or (b) stick to quality control and follow the
logical intrapreneurial policies for mature (not infant) firms.
Next, some good news for
old countries, making old-fashioned things.
At the beginning of this century the two largest occupations in America and Britain were agriculture and domestic
service, together employing around half the workforce. Today these two employ under 4% in each country, and until the 1960s
it seemed probable that manufacturing employment in the world's rich north would drop the same way. Now the success of Japan,
and the discovery small is more flexible, are good news for Europe's and America's manufacturers.
a multimillion-dollar factory with 10,000 men can produce more cheaply in Brazil than in Birmingham, the multimillion Eurodollars
will roll to Rio, but probably not the $50,000 for a five -man Brazilian workshop lest the five and the $50,000 disappear
to the bush. In my 1976 survey I argued that robots and computer-controlled manufacturing systems should make rich countries'
manufactories smaller and more intrapreneurial, dreaming that some might become one-man workshops. This proved to be underdreaming
since some Japanese small businessmen now have no-workman garden worksheds, where their unwatched leased secondhand robot
system hammers out a component for some big factory, while the small businessman is touting entrepreneurially on the golf
course for new orders.
The Japanese have always based their continuing manufacturing miracle
on tiny entrepreneurial component-makers (one Japanese worker in six now owns a small business) and on surprisingly small
but brotherly profit centres even within huge plants. To quote Harvard University's Professor Ezra Vogel:
The essential building block of a Japanese company is not a man with a particular role assignment and his
secretary and assistants, as might be the case in an American company. The essential building block of the Organisation is
the section. A section might have perhaps eight or 10 people. Within the section there is not as sharp a division of labour
as in an American company. To some extent, each person in the same section shares the same overall responsibility.
If you go into a Japanese assembly-line factory, you first see the components flowing in (maybe from those
automated no-workman garden sheds), and subjected to very tight quality check. At each stage along the automated assembly
line, most of the regular workers are also just reading dials or otherwise checking for quality, usually in those co-operative
sections of about eight men. The section is told at its daily post-breakfast meeting how many subsequent faults were later
found in its checked products, compared with the allegedly larger number of faults missed by the equivalent section in a main
rival company (loud banzai).
At the end of one Japanese hi-fi-set assembly line near Osaka
I once found a rather jolly crew actually doing manual work, packing the awkwardly shaped sets into cardboard boxes. They
were not wearing Company uniforms. It had been decided that this measurable manual work, right there on the assembly line,
could be contracted out to a separate tiny firm (virtually a workers' co-operative). Question: who decided how many workers
should be on this job, and thus their working hours and income per head? Answer: the workers themselves, like my Typists Intrapreneurial.
Mr. Revans's action learning
The Japanese have become the
world's best businessmen partly because they do not go to business schools. Indeed, they wisely do not believe in off-the-job
government-subsidised training programmes for absolutely anything. One foreign management academic mentioned in Tokyo with
real respect is the English Professor Reg Revans of the Manchester College of Science and Technology, of whom I had never
previously heard. Since corresponding with Mr. Revans (who teaches that "the sudden decline of the English-speaking economies
of Britain, Canada and the United States is partly a consequence of the rise of the academic business schools"), I see
why his articles do not frequently appear in business school publications-although his 900-page hardback "The origin
and growth of action learning" is about to be published in Sweden with help from Lord Weinstock and others.
Mr. Revans's own system of "action learning" is to put a small (I would call "intrapreneurial")
group of four or five people into the field with a mandate like "make the business side of that hospital more efficient",
all the time recognising:
that managers learn with and from each other as they work together
on real problems (or opportunities) for which no course of action (let alone solutions or policies have yet been agreed; since
the problems are real, it is insufficient that the manager should discuss or diagnose them without also taking steps to treat
them. An action learning project is thus a sustained and iterative attack, conducted in parallel with three or four others,
upon a real problem by a real manager, regularly meeting his three or four colleagues to offer and receive advice, criticism
and support about the diagnosis and treatment of the problem....
It is clear that these
groups have some times brought real advances-for example, they helped to breed the supposed Japanese idea of "quality
circles"-a well as being schoolmasters. A main difficulty is that real reform programme generally require what Mr. Revans
calls two dimensions: (a) the recognition that some particular activity needs to be ended, and then (b) a tremendous fight
against those to be supplanted who have acquired reputations as experts in the prosecution of what needs to be wound up. We
are approaching the problem of making lame ducks fly. Two that did:
Flour and textiles
One of the few top 500 American companies to have grown in the past two, decades
was in 1960 the largest flour miller in the world. Pause to ponder whether you would expect this to be an expansive business,
and what you would, advise it to do with its flour mills. Answer: not expansive, and this firm prospered mightily by closing
half the flour mills in America down. It got out of businesses making 40% of its previous revenue, and split into more than
6 separate companies, some doing very different things.
Next question: would you a expect
corporate planner to recommend some thing like that? Answer: no, all of the executives involved in the 40% of existing businesses
to be scrapped would be up in arms, and even the Archangel Gabriel could not sensibly suggest today that the company should
go forthwith into the following 60 lines of business. So the company did what I think is the first essential thing in corporate
planning: it sacked its corporate planner, and set up small "developments department". It decided that its strength
was marketing consumer products (it had early been successful in advertising and selling some breakfast goo). Then it invited
proposals for small ventures based on this strength.
The new businesses have ranged from
fashion goods through toys to restaurants. A spectacular example was that a film buff had heard that a film was being made
which needed to find ways of getting more finance but looked as if it might become a cult among kids across the world in the
five- to 12-year-old age group. Intrapreneurial question: what do we do? Answer: buy the franchise for toys with the film's
name, and advertise in the trade press for small firms to submit particular toys which, if they passed the company's quality
test, would carry the insignia. The film was called "Star Wars". Revenue went from nought to $100m in one year.
Cautionary tale. When I last talked to a meeting of this company, it seemed to have developed a matrix Organisation
chart (which Reg Revans rightly calls a device for repudiating responsibility), lots of group vice-presidents in charge of
different divisions named after products (which is exactly the wrong concept), a habit of buying existing businesses instead
of creating ideas (oh dear).
A second rescue story has been in Italian textiles, where
one of that country's evanescent governments devised the best possible industrial policy partly by mistake. Previous governments
had imposed bureaucratic controls on all companies, so this one said that any firm with fewer than 20 workers would be free
from these. Of the 15,000 textile factories in the main textile town of Tuscany, 13,000 have fewer than 10 employees. One
minister for industry who helped to spur this system was the professor who had translated my 1976 survey into Italian.
The industry now has just about the highest textile wages in the world, and the frontier between the boss
and worker moves all the time, because if the small works of which you are main owner fails you turn into being a friend's
worker for a time. And this is not just one freak way of running an adaptive textile industry. In continually changing industries-which
in future may mean all industries-it is increasingly going to be the only way, although the relation to the small producing
unit of the big-firm-buyer doing the quality checking will vary.
Since most readers of this survey are not Italian ministers of industry, let
us consider some profitable intrapreneuralism which quite junior businessmen reading this could initiate with one memo now.
Since the advent of competitive air fares, there have been -five possible ways for a firm to run its executives' air travel,
and most very big companies still choose one of the two craziest. Take your pick:
A, contract travel arrangements out to a travel agency which is paid on a percentage commission so that it gets most money
when executives go by the most expensive way.
System B, set up some underemployed secretary
as a profit centre to ferret for cheaper fares. You tell any executive who has to travel on the firm's business whether his
entitlement is economy-class fare or first-class fare. Then if he arranges with the secretary who has turned herself into
an expert on cheap fares to go a cheaper way, they split the saving-say, one third to the company, one third to the traveler
and one third to the secretary as profit centre.
System C, let as many secretaries or hall
porters or whatever as want to play this game set themselves up as competing profit centres. Let them either co-operate or
compete with each other, as they please, but with the quite simple check the company accountant pays the bucket-shop's air
fare for £90, there is a note saying Mr. Smith's entitlement will usually be a fare of £390, the company takes
£100 of this £300 saving, and returns £200 for the other two to split among themselves as they like-licences
withdrawn if the travellers don't arrive on time.
System D, give the money to the executives,
and let them buy their own fares-cheaply, if they wish. .
System E, set up a central department,
bullying executives to go to Hongkong by standby Aeroflot flight 'via Iceland and Irkutsk.
least sensible systems are A (the travel agency) and E (the central travel department), so most very big British companies
use one of them. The disadvantage of D ("give them the money") is that executives then travel too much and use the
firm's time to hunt bargains. The most competitive system is C (the co competing profit centres), but go via B (the single
profit centre) first and try to develop op into selling this service outside?
I would like such business to develop through lots of groups "secretaries intrapreneurial", trying sell lots of
services outside including t use of capital equipment that in many offices lies idle for 150 of the 168 hour week. For example,
many firms have "infotech" (in America "rapifax": facsimile transmission by telephone) devices connected
with their branch offices abroad, sometimes into foreign countries which don't have Saturday mail deliveries when you won't
be using your infotech anyway. Test launching-an advertisement saying contact a recorded message on your ansaphone detailing
your services on offer?-could cost virtually nil.
Behind all these prospects lies the present
advance of the computer in completely inefficient underuse. Data processing departments are being given the incentive to do
as little work possible, and top management over age 50 does not press them because it hates revealing that it does not understand
computers anyway. The computer age has therefore started without most big organisations having a daily and imaginative productivity
hunt to discover how the computer can best be used.
This mess is worst in the world's biggest
information-handling industry, which is government. If you talk to a seminar of (eg) senior British inland revenuemen you
find that they are engaged in commissioning meaningless "feasibility studies" on how to computerise pre-computer
systems of operation without anybody thinking (let alone testing intrapreneurially) how changing the system to fit the computer
age could remove the need for two thirds of the unnecessary labour now being done.
road to efficiency in all government offices could be paved by the simplest sort of intrapreneurialism. You divide people
into groups of under 10; tell them that this is the work to be done by them, and that if (in association with the computer
people etc.) they can cut the time spent on it, then they can have the advantages of a "Typists Intrapreneurial"
(the flexitime, the self-organisation, the opportunities for outside income). Savings would eventually be huge.
Doubters say that all this is white-collar stuff,
and how could intrapreneurial work in (eg) some heavily trade-unionised British business going bust? Answer: in Britain, and
many other countries buy-outs by employees of bust and heavily trade-unionised businesses are now proceeding fast.
When a big company closes a loss-making subsidiary, it often finds that redundancy costs etc. make the net
proceeds on liquidation derisory, so the opportunity arises for a small group of workers to buy the firm for a knockdown price.
Sometimes a big company will also sell subsidiaries that do not fit its "overall strategy". Since any company which
uses that phrase will have been managed absurdly, these can be better buys still. In 1977 an American company sold a large
British factory for £350,000 to two top employees who had only £12,000 capital between them. The two borrowed
£100,000 from two overseas distributors, plus another £100,000 from a bank; and persuaded the selling company
to accept the other £150,000 on deferred terms (and also to retain a 5% equity stake). Efficiency and profits soared.
As was clear from answers to a questionnaire in a recent do-it-yourself booklet on Management Buy-Outs by
The Economist Intelligence Unit (EIU Special 115, price £30 or US$60) most big British banks and near-banks are
now eager to handle this suddenly booming buy-out business. The recently renamed National Enterprise Board will be losing
taxpayers' money on it (it told the questionnaire that its object was to assist "companies in advanced technology and
companies in English Assisted Areas whose requirements cannot be met appropriately......", oh dear), but all the other
banks fortunately say they are zooming in to make profits. The EIU's sample suggests the failure rate in buy-outs is less
than 10%, versus 30% in new start-ups, even though the start-ups are in the ventures deemed most profitable to start and the
buy-outs in those which big businesses want to shed.
A familiar difficulty: buy-out teams
should preferably be small (the EIU recommends two to five) because more than six new entrepreneurs quarrel. That problem
can sometimes be assuaged by halfway devolutions to separate small groups. One example of such intrapreneurialisation under
particularly unfavourable conditions in the 1970s was a British film studio which ran one year into a huge loss, because its
workers spent most of their days drawing large overtime while waiting around. It was closed, and the workers were given redundancy
money, but some were asked if they wished to stay on to operate freelance in what became a film facility studio. A producer
who made a film in the studio had thenceforth to negotiate separately with the intrapreneurial cameramen (who were intrapreneurially
doing outside jobs in shooting television advertisements), with the plasterers, carpenter's shop, lighting and electrical
men (who were also operating outside in the normal neighbourhood ' For example, small teams at any two building trade), the
former transport department (now running a minicab service) etc.
Ride out on the
End with the British nationalised industries, which were originally
created because it was assumed that large private monopolies in them would too easily make excessive profits, but are now
all great stranded whales. The railway engine drivers of Britain have some agreement, which no small firm could grant, so
cheaply so long ago. that an unnecessary two footplatemen should travel on most trains where there is work for only one to
do. A sensible minority sign on to draw their wages but do not actually go to these pointless journeys. They slope off to
increase the real national income by running their black-[economy minicab services etc. This winter saw a rolling strike because
British Rail was trying to introduce a "productive deal" through flexible rostering which-so long as it was accompanied
by promised of no redundancies-would achieve a net cut in the national income by obliging the men to close some moon-lighting
If groups of train drivers were organised like Typists Intrapreneurial they
could vote whether to make most money for themselves by sacking their mates, whether to make least money for everybody by
retaining the present system, or whether to keep the mates outside the trainings to run more intrapreneurial services (eg,
minicabs geared to meeting trains). Similar possibilities for local authority dustmen (many of whom can complete their existing
jobs before ll am), turning coal pits into workers cooperatives, right across the state sector. The intrapreneurial improvements
in productivity would likely be very large, because the existing productivity of management and workers in this sector is
so unbelievably low.
For example, small teams at any two or three partly unnecessary British
Rail suburban stations could then decide which stations to close and sell, how and when to run car parks or jitney services
at or to those kept open, what best uses to make of each square yard of British Rail's overabundant space (just over a decade
ago a survey showed that it owned 6% of the land area of the then borough of Camden). Only a giant organisation could be losing
so much money when it owns so much underutilised land bought so cheaply so long ago.
In most large British workplaces there are no direct incentives for ordinary
workers to speed or improve production and no way in which ordinary folk can have the fun of suggesting (and participating
in) constant experiments to improve their group's efficiency. Except when they are frightened lest bankruptcy may bring them
the sack, it is therefore natural for most British workers to resist productivity drives that disrupt their habits at no benefit
to themselves. The conventional doctrine for running British industry is becoming the daft one that a manager can best get
higher productivity by running his firm constantly on the verge of bankruptcy, and that his workforce's main enjoyment of
the loveliest human excitement called group togetherness will be when going on strike.
most firms are less near to terminal illness than (eg) British- Rail, they could often find the way forward to greater profitability
and more participatory workplace fun by starting intrapreneurial ventures on a small scale (which is the right scale on which
to start them) and letting them spread. If these 1976 and 1982 surveys encourage any pioneers down that road, they will be
worth the aggravation that this sort of writing unhappily manages to cause.