Nigeria experienced an economic downturn in the 1990s. There was a serious capital flight due to the heightened political tension caused by the annulment of June 12, 1993. Companies closed down and many people lost their jobs. Inflation was at all time high – double-digit – which depleted the purchasing power of the ordinary citizens. It was demand-pull inflation – as is always the case in Nigeria.
It was during this period that the former military junta, Ibrahim Babangida, made his famous observation that the Nigerian economy defied all economic logic. Banks managers used all kinds of unconventional methods on their deposit drive. Corporate governance took the back seat as managers struggled to keep their jobs by keeping the company afloat. Competitive forces were at play at that period but they were not so strong. Those companies that seemed to be surviving were benefiting from government patronage.
The emergence of the democratic dispensation in 1999 ushered in a new business environment and opened up the competitive landscape, and a new vista of opportunities. The government economic reforms – from government control to private sector-led or free market economy opened the telecommunications business space. This, coupled with the banking sector consolidation, contributed to the changes being experienced in the Nigerian business environment, and more especially in redefining the shapes and forms of organisations and how they are run or managed.
These changes were not peculiar to Nigeria. It was a global trend except that it has been more rapid in the developed economies than the Nigerian situation. As a matter of fact, Nigeria has a lot of catching up to do.
According to Harvey and Brown (authors) ‘’change is avalanching down upon our heads and most people are utterly unprepared to cope with it. Tomorrow’s world will be different from today’s, calling for new organizational approaches. Organizations will need to adapt to these changing market conditions and at the same time cope with the need for a renewing rather than reactive workforce. Every day managers confront massive and accelerating change.’’
Globalization has further flattened the world and intensified competition within and without industries. Organizations have to compete on all fronts – people, material, market share, and products/services – in order to survive. The way organizations were managed in the past can no longer work in today’s knowledge economy. Several organizations are changing the way they organize and manage so as to increase productivity, be more cost efficient as well as remain competitive.
New competitors are entering the market space on a daily basis. So, successful managers need to be able to deal with this increased competition and constant innovation. Tom Peters (author) commenting on the recent rate of change stated: ‘’the time for 10 percent staff cuts and 20 percent quality improvement is past… the rate of change demanded… and the boldness of goals suggested will be unfailingly new – and frightening.”
To survive or win in the knowledge economy, companies must respond to accelerated change. What does the manager need to do to be successful? She needs to be flexible and adaptive, diagnose and implement change programs introduced in the organisation.
One important point to note here is that organisations are not static. They are dynamic and as such in a continuous state of change. To win, organisations must respond quickly to change. Organisations are today faced with both domestic and global competition. Many countries have subscribed to the WTO agreement and as such the advantages they used to have (e.g. protection from foreign competition by the home government) have been narrowed. In addition, advancement and breakthrough in technology coupled with continuous changes in consumer lifestyles have also intensified competition and caused organisations to change.
It is important to note here that most changes that occur in organisations are forced on them by both external and internal forces. But the degree of change varies from one organisation to another. Some are quick to respond to change and some are slow to adapt to change. The environments in which organisations operate are becoming more complex with each passing day. Therefore, organisations must change and also must adapt to change in order to survive.
As companies are forced to change, managers need to be aware of these environmental forces confronting them and develop a new set of skills and tools required to deal with changes in the organisations. One important tool is education. Education is the winning ticket managers need to succeed. By education, I mean continuous learning for as long as one is alive. It does not end with acquiring a certificate.
Let me backtrack a little bit to elaborate on what an organisation is to better contextualise this discourse. John Argenti (author) defined an organisation as a group of people acting together to generate a satisfactory benefit for its beneficiaries. He further identified six types of organisations, which he grouped into an introvert and extrovert organisations; project and permanent; and company and Not for Profit Organizations (NPO).
Project organizations, Argenti argued, have no formal management structure in the traditional sense of it but at the same time, it could be effective. What they do have is an aim or objective which every member can see perfectly well and how they can best act together to attain it. ‘’Both the aims and the means are so obvious and compelling, that single-mindedness is thrust upon them by the circumstances, and a high level of effectiveness is achieved without any formal management at all.’’
Introvert and extrovert organisations, on the other hand, are like a group of friends acting together in their own interest. Argenti described introvert organisations as those that act to benefit the members of the organisation themselves (e.g health clubs, a trade union, a cooperative and all companies). Extrovert organisations, on the other hand, are those which aim to benefit persons other than the members (e.g. government, a hospital, a school and all charities).
Companies and NPOs are profit-making and Non-profit-making organisations respectively. According to Argenti, ‘’companies are always introvert (companies are formed by the shareholders for their own benefit), so there can be no such thing as an extrovert company. NPOs, on the other hand, can be either…all NPOs run by or sponsored by the government (agencies, corporations, institutions and the like) are extrovert and that no democratic government likes to be seen running an introvert organisation.”
Argenti further stated that ‘’all types of organisations can be permanent or project. No organisation can be both a company and an NPO, nor introvert and extrovert at the same time, nor of course, project and permanent.” He concluded that the whole point of forming an organisation is to achieve something that one person alone cannot do but to do it as nearly as single-mindedly as a single person would. In this modern world, he stated, the individuals working on their own in rugged isolation is on the decline, while organisations play a growing role in our lives.
I have often said that the new knowledge economy is an era of constant accelerated change. But when you look at how organisations are designed, though they are designed to accomplish specific purposes or perform some specific functions and do so in perpetuity, they are not really intended to change. Several factors could cause an organization to change. The change could be as a result of intense competition or to survive or even to improve the performance of the organisation. Though organisations keep pace with change they should go further to adapt to the changing cultural and social conditions.
The knowledge economy organisation is characterised by being smaller (lean), faster, quality conscious, employee participation, customer orientation. In addition, they are faced with having to adapt to new technologies and new product introduction. The business environment is more uncertain today and in the future than it used to be. Managers will learn new ways of managing in uncertainty. Long-term planning of 10 – 20 years and above has been reduced to 5 years and in some cases less than that. Legends said that the idea of long-term in Japan was 150 years. This helped the Japanese to manufacture durable products in the past. In the U.S, according to another source, it is expected that you should not be using, for example, your car after five years without changing it. This will become shorter as we progress into the middle of the knowledge economy.
Organisations will become more competitive in this era, and competition will not only come from local companies, but also from abroad. As countries become more democratised and open up their economies, multinational companies seeking opportunities, especially in emerging economies, will compete with local industries for the share of the market. Domestically, established firms will have to compete with innovative and nimble entrepreneurial businesses. More of such entrepreneurial companies will enter new and old markets where the established ones used to hold sway. In fact, globalization has pulled down almost all walls of protection and flattened the competitive space.
As mentioned earlier the lifestyle of consumers will continue to force change on organisations. From fashion to electronics to cars, consumer lifestyles determine what companies produce. Another force is trends. One trend that will be here with us for some time is pop culture. In fact, Thomas Friedmann had predicted that globalisation of culture will be the next big thing.
To survive and thrive in this dispensation, organisations will seek out and create more niche markets where competition is less intense or where they can have the first-mover advantage and consolidate. They have to be totally committed to producing or delivering high-quality goods and services. To be effective and more efficient organisations will have more autonomous business units. In the past lip service was paid to human capital. This has changed. The global war on talent is enough evidence to how organisations are adding value to their businesses and customers through highly skilled and professional staff. The bottom line is that firms that will be successful are those that will be more responsive to change and innovation.
Dr Austin Nweze is of the Lagos Business School, Pan African University.
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