Cover: The ''Virtual Corporation'' and Army Organization

The ''Virtual Corporation'' and Army Organization

Published 1997

by Francis Fukuyama, Abram N. Shulsky


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The Changing Commercial Environment

The next twenty years are likely to see very substantial changes in the nature of all organizations, whether civilian or military. One important factor facilitating and, to some extent, driving these changes will be information technology (IT), whose relentless advance—it is said that the performance/price ratio of central processing units (CPUs) doubles every 18 months—is not expected to abate any time in the foreseeable future. As in previous technological revolutions, however, the second- and third-order effects of the changes will not be felt until organizations adapt and learn how to take advantage of new capability. We cannot predict how these changes will evolve, but we can extrapolate from recent trends and argue by analogy from earlier revolutions in information technology. Although discussion of the "revolution in military affairs" has centered around the impact of technology on weapons systems, there are reasons for thinking that more fundamental improvements in military effectiveness will require, along with doctrinal changes, the use of appropriate organizational structures.

Changes in the ways that commercial organizations do business have already been tremendous, and most observers believe we are witnessing only the tip of a large iceberg. Product cycles for complex, high-tech goods have been radically shortened, requiring in some cases a mere eighteen months between concept and marketed product; markets themselves have become much more complex, segmented, and demanding; production and markets have become globalized; and services now dominate the production of new wealth. To an ever-increasing degree, the economy is moving from an industrial-age model, in which machines and natural resources are used to produce material product, to the "information-based organization" that produces goods or services through the use of human capital.

The actual and predicted consequences for commercial organizations are dramatic. The key initiatives involve speeding up the flow of information through an organization, and creating the proper conditions and incentives for taking action on the basis of that information. Overall, it is argued that companies as a whole will become smaller; that large, vertically integrated corporations will either flatten their managerial hierarchies or else evolve into networks of smaller, more agile firms; that low-skill labor will continue to be devalued and replaced by work with greater skill and cognitive requirements; and that self-organized teams will displace individual effort. All corporations will have to operate in a much more uncertain and chaotic environment and will therefore place a premium on flexibility, learning, and adaptability. They will have to be designed in more of the self-organizing fashion of biological systems, rather than being conceived as elaborate mechanical systems designed and controlled from the top.

As an organization flattens its hierarchy, a number of factors have to be kept in mind. Decentralization is not an end in itself; there are certain functions performed in organizations that are better performed by centralized authority than on a distributed basis.[1] Centralized organizations generally can move more quickly and decisively than decentralized ones, and they can achieve scale economies more readily; on the other hand, they may adapt more slowly to changed circumstances, and problems at the "center" may tend to paralyze activity throughout the organization. A military organization seeking to accomplish a specific goal in the near future needs centralized command authority; a military seeking to adapt to a fast-changing and uncertain external environment needs a higher degree of decentralization in order to adapt adequately. Today's Army is arguably in the latter situation: given that it is very hard to predict the kinds of wars it will fight or the weapons it will use in another 20–30 years, the key to a successful future Army is sufficient flexibility and adaptability to adjust rapidly to changes in future environment.

The Military as a Flat Organization

While an army might at first seem the epitome of a large, hierarchical organization, there has been a long tradition of flat armies that predates similar innovations in the commercial sector by several decades, if not generations. Military organizations have always faced problems of poor information—and more severe ones than their commercial counterparts do, since they face an enemy using all means to deliberately disrupt their flow of information. Motivation in military organizations has always been social in addition to individual, moreover, since combat involves the risk of death; it is no surprise, therefore, that "teams" have been widely used in armies before they were introduced into factories.

There are a number of historical instances of flat combat organizations. Napoleon's headquarters at the Battle of Jena in 1806 directly controlled eight separate corps with no intermediate command echelon. So broad a span of control was possible only because each corps was trained and equipped to act autonomously; indeed, on the day of the Battle of Jena, Napoleon failed to communicate with two of his corps, while a third went on to win the battle of Auerstädt without his knowledge.

The Prussian army had a long tradition of encouraging independent action on the part of subordinate commanders, and in World War I the German army began experimenting with storm trooper battalions that were trained to fight with a high degree of independence. The storm trooper concept failed during the 1918 Ludendorff offensive because of inadequate information technology; the German command was unable to reallocate reserves and fires because it did not know where local breakthroughs had occurred. This problem was essentially solved, however, by the development of Blitzkrieg during the 1920s and 1930s; use of independent tank formations and the mobile radio permitted the sort of fluid, fast-moving operations and flat command structure originally envisioned for storm trooper battalions.

In many ways, the U.S. Army incorporated these German concepts of flat military organization into its own training and doctrine in the postwar period. "Mission orders," "commander's intent," and similar terms related to maneuver warfare have all entered into Army doctrine. While the 1986 version of Field Manual 100-5 lays greater emphasis on maneuver warfare and decentralized command and control than the 1993 version does, both documents stress the importance of lateral communications, initiative and risk-taking on the part of subordinate officers, and the need for senior officers to concentrate on planning and other high-level functions rather than the overseeing of detailed execution.

If it is true, as a number of critics have argued, that U.S. Army command and control nevertheless remains too centralized, hierarchical, and inflexible, it is a problem not so much of doctrine than of the way that doctrine is implemented. There are a number of functions in military organizations that either require centralized command authority or else encourage an excessive degree of centralization. It is critical to sort out functions that need to be centralized and those that are better devolved to lower levels of the organization. Among the factors encouraging centralization are

  • Strategic planning
  • Fire support
  • Logistics
  • Medevac
  • Intelligence
  • Political factors.

Of particular concern is the possibility that development of the so-called revolution in military affairs (RMA), which will permit U.S. forces to bring to bear highly precise fires from a wide variety of platforms, will encourage more centralized control systems for the sake of the deconfliction and efficient allocation of fires.

Implications for the Army

Many of the changes we anticipate for the U.S. Army in the future have already been sanctioned by doctrine but cannot today be implemented, and may not be fully implementable by Army XXI. For example, FM 100-5 describes the "nonlinear" battlefield, whose workability is currently limited by inadequate communications, logistics, medevac, etc. Extrapolation from present trends suggests the following organizational changes.

Number of Echelons

Advances in IT suggest that the "Pentomic" structure, which eliminated one echelon below division level, may now be more feasible than it was when first proposed in the 1950s.[2] The possibility of greater lateral communication, combined with "informated" reporting systems and automatic processing of routine data, may make the flatter organization structure advantageous. More generally, it may be advantageous to assign responsibility for specialized functions in ways that skip some echelons. For example, a "Wal-Mart"-type system for logistics would allow some data to flow from the field directly back to depots in the continental United States (CONUS); intermediate echelons could access the data but would not be responsible for processing it. At those echelons, commanders would manage "by exception," i.e., they would be able to adjust operation of the system when they felt it necessary.

Similarly, command structures may have to be streamlined to handle areas of particular political sensitivity. One possibility would be to reduce the number of layers between the on-scene commander of a politically sensitive operation and Washington, at least with respect to the major operational questions. The intervening levels may still be necessary for logistical and other forms of support. But if they hinder direct communication between the field and Washington, they make it harder for the on-scene commander to understand the political constraints under which he is operating.


The lethality of all weapon systems is constantly increasing, and the RMA will provide many alternative nonorganic sources of fires. In addition, many of the threats faced in the early 21st century may be considerably smaller than those NATO planned for during the Cold War. The consequence of these intersecting developments may be the "downsizing" of military units and a lightening of logistics loads, in ways that will make them easier to deploy and more flexible in their uses.


An overall reform of the defense procurement system will no doubt be very difficult to achieve. In the meantime, recent experience suggests some strategies for chipping away at the problem.

For example, the development (during the Gulf War) of an earth-penetrating bomb in six weeks shows what the system can actually do under the right circumstances. We should be looking for and exploiting other instances in which accelerated development could be justified (e.g., air-implanted personnel or light vehicle sensors for use in Bosnia); not only would this provide deployed forces with useful capabilities they would not otherwise have, but it would accustom us to rapid and flexible operation and highlight the costs of the usual system. Similarly, the use in the field of systems such as JSTARS and Predator before they officially become operational suggests that a blurring of the line between the developmental and operational phases is not only possible but very advantageous. In general, past experience must be studied and imitated where appropriate, and we should seek and exploit opportunities to gain relevant new experience.

Personnel and Training

An army that requires lower-ranked officers and men to exercise greater initiative and assume greater responsibility must ensure that those personnel have adequate training and expertise. Some corporations have responded to this challenge by separating the processes of career development and promotion to make sure that specialists can be adequately rewarded for good performance without having to join management ranks and hence cease practicing their specialty. (To some extent, the armed forces do the same by providing an enlisted promotion path through E-9 without leaving enlisted ranks; this appears to keep a great deal of expertise and experience in closer contact with the troops than would be the case if advancement beyond, say, E-5 required becoming an officer.) In the future the Army may have to apply this principle to various specialties in order to keep expertise at the lower levels of the organization. This may require going beyond current practices with respect to incentives for needed MOSs and officer career specialties.

Reducing the number of echelons and keeping more expertise at the lower levels may, however, make it more difficult to train officers for high command, since advancement through the ranks has been the main method of preparation. In addition, the handling of certain specialized functions, such as logistics, by "informated" systems that bypass some echelons implies that officers serving at those echelons will lack experience in overseeing those functions; thus, it will be only at the higher levels that officers will gain experience in dealing with the whole range of support functions.

This implies that even more attention will have to be paid to training in the future than is now the case. The proliferation of IT offers many possibilities for making training more realistic; in particular, command post exercises can be run at a much greater level of detail.

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  • [1] More generally, it must be remembered that questions of organizational structure (e.g., centralization versus decentralization) are, although of great importance given their widespread effects, only a part of the larger subject of management methods and the ways in which they are changing. Thus, issues of organizational structure must be considered in the context of many other variables; there is no "one size fits all" solution.
  • [2] For an overview of the historical Pentomic experiment, see Andrew J. Bacevich, The Pentomic Era (Washington, D.C.: National Defense University Press, 1986).

Research conducted by

The research was sponsored by the Deputy Chief of Staff for Doctrine, TRADOC, U.S. Army and was conducted in the Arroyo Center's Strategy and Doctrine Program. The Arroyo Center is a federally funded research and development center sponsored by the United States Army.

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