The Modern Firm - Book Report/Review Example

John Roberts: The Modern Firm: Organizational Design for Performance and Growth, 2004 The Modern Firm is an exceptional book on business management that looks into the increasingly changing environment of the business world and the needs and demands that seek out such changes. John Roberts is an expert economist who has summed up his entire studies in the field of business firms in this highly enlightening book. He not only tells us what the leading industrialists do to attain success, but also gives us an insight as to why they do so. Thus, these insights can be more readily applied to any developing business firm to achieve the desired level of success. According to the Economist, The Modern Firm is the "..best business book of the year...deserves to be a classic...Nobody, it can now be said, is fully fit to run a modern firm until they have read "The Modern Firm. " (The Economist, 16th December, 2004). Times also agrees with Economist calling the book “interesting” that is not so in many business literatures. Objective The book’s objective is to explicate some of the core concepts in organizational economics in a language accessible also for the lay people (Fredrick Tell, November 2006). The Wave of Change In this book a strong conceptual framework has been developed to analyze the interrelation between business environment, competitive strategy and organizational design features. According to Fredrick Tell, the essential problem that Roberts discusses is how features of strategy and organization can be modified by a “designer” so as to achieve higher level of performance in relation to the firm’s context. Industries from all the corners of the globe are introducing new and modern designs for their organizations. They are going in for better and innovative architecture. They are changing their processes and routines. Thus, we find that the total corporate culture is undergoing a dramatic transformation in a bid to maximize their profit. However, all these changes are contributing towards a great upheaval that promises to reconstruct the entire organization. Hence, we can see that the values and beliefs of any organization are greatly transformed with the passage of time. The changes do not stop at the infrastructure level but move on to the power making authorities too. Hence, newer governing bodies are being formed within the organizations that affect the overall decision taking authority. The organizational charts are being redrawn while the manpower is shrunk and made as diverse as possible. Outsourcing is also coming up as a cost effective and simple solution that solves much of the productivity problems. The mechanism to reward and motivate people is being revamped. The information system is also being redesigned to include latest technologies. Hence, the entire organization is suffering a facelift to present the business in a healthier and better way. Compulsory Changes John Robert argues in favor of these changes as he says that they are compulsory for the growth of the industries. He says that these changes would affect the organization in a better way and accelerate the companies’ performance and growth. However, the writer cautions that the change should not be done to the cost of the basic profit formula. The industries that are already successful and showing great monetary returns should continue to embrace that winning formula while affecting the required overall change. The Determinants of Performance According to the writer, the performance has three determinants- Strategy, Organization and Environment. Strategy: What merchandise is suitable for which market? Organization: It consists of a collection of workers and the way they are grouped. Environment: Customers, competitors, technology, regulatory and regal context, various social, demographic and political features, and so on. When all three determinants work in accordance with each other then the performance level is maximized that result in a greater level of achievement. PARC PARC is Roberts’ brainchild that helps in creating optimum efficiency level. Here PARC stands for P- People, A- Architecture, R- Routines while C- Culture. He wants to create highly committed human resource management that has the features of transparency, trust, egalitarianism, empowerment, teamwork, job enrichment, along with a self identification process in line with the firm’s vision. One can achieve this target with the help of secured job, job satisfaction, making the work environment more interesting, premium compensation via team, self managed team, tough pre-employment screening, transparency in information sharing, extensive training and socialization, open upward communication channel, and creation of such an organization where the employees would feel themselves as owners and contribute their utmost towards a better productivity. Roberts gives an example of the Nokia company where “The organizational architecture was kept fluid with project teams forming and dissolving easily, so all had the opportunity to work on interesting things and to build networks across the firm.--- The leaders of the company were open and very approachable and they clearly operated as a team and set an example of teamwork throughout the organization. Value-based leadership rather than control through rigorous processes was the model and the values of customer satisfaction, respect for the individual, achievement, and continuous learning were acted upon consistently.” Chapter 1 In chapter one the writer proposes that “[a]chieving high performance in a business results from establishing and maintaining a fit among three elements: the strategy of the firm, its organizational design, and the environment in which it operates,” while the manager works “to craft a strategy...and create an organization...in light of the environment to maximize performance.” However, one can say that different organization have different requirements, hence each of them plan their organizational designs and strategies based on them. It is shortsightedness to have the same goal and strategy for diverse type of businesses. Chapter 2 In the second chapter, John Roberts concentrates on the need for understanding customer requirements and building the products accordingly. The individuals’ demands change with the passage of time. A tough competition, both in the country and internationally, make way for the demand of better merchandise. So, unless and until a company is producing its goods according to the customers’ choice, they would not be able to reap an apt profit. So, the organizations need to invest money in consumer survey from time to time to keep their produce always up-to-date. Roberts further says that the role of the manager is very important to combat the tough competition from his competitors in making his firm escalate from one peak of success to another. Chapter 3 The third chapter has a discourse on the tradeoffs associated with organizing economic activity through a business firm rather than through markets. Activities requiring cooperation between the actors seem to favor organization through firms while the activities that require bigger initiative seem to favor the markets. Chapter 4 This chapter delves inside the factors that support the interest of the workers along with the firm’s interests. This discussion looks into a wide area of problems and the relationship between worker motivation and organizational design. Writing Style The Modern Firm has been written in a lucid, simple and non-technical language that can easily be comprehended by a layman. Its language is engaging and interesting and enfolds new information and ideas in a systematic flow of thoughts. Robert uses powerful concepts that promises to bring a tremendous changeover on any organization that wishes to implement them. It is a practical and readable discussion that do not confuse with numerical notations. He includes a number of examples both from old organizations and the newest ones to show how the business world has evolved since the 18th century and how the business environment is using these changes to further their growths. He explores the reason for these developments, and reasons that the rise in international competition and latest changes in technologies may be the basic cause of them. The book is for everyone who is interested in economics, sociology and the business world and more specifically targets the managers, scholars and students. Strengths The theories and concepts presented here are drawn from some of the best researches and their usefulness is illustrated by a few real life examples. The Modern Firm gives a number of actual examples from leading companies such as Nokia and BP to analyze and discuss their reasons of rise and growth. Roberts’ unique economic thinking and his vast years of experiences are summed up in a concentrated manner in a short and handy book. The writing style is very clear while the more complex issues are given in-depth treatment in the notes. It does not lure the customers by promising simple solutions to complex problems, but helps them with strategic planning so that they are equipped with the knowledge and power to deals with the problems in their own unique ways. Drawbacks Every book suffers from certain drawbacks and The Modern Firm is no exception. Though the book gives us insights of the working of big and successful enterprises, it has nothing new to offer to the established ones. All his discussions are a summary of his years of experiences as a top rated economist; still he does not use his brilliance to provide his readers with any unique strategy that came from his very own thinking. Moreover, the organization and editing of the book needs a bit tightening up. Roberts does not much use subheadings that could make for an easy read. Work Cited 1. Fredrick Tell. Journal of Management and Governance. Volume 10, Number 4. Web. 17th November, 2006. 2. Robert Youker. PMF Book Review. Volume IX, Issue VIII. PM World Today. July, 2007. 3. James H Murphy. College of Business Book Reviews. 4. The Economist. 16th December, 2004. Read More