LEADERS WHO MAKE A DIFFERENCE 217organization given the existence of a myriad of alliances that make up
the company. In a similar vein, Welch has noted on many occasions that
General Electric is a company made up of small companies where people
are very much encouraged to take on intrapreneurial challenges. The
outlook of Barnevik has been very similar.
In this new type of organizational structure, large head offi ces,
which were previously needed to exert control over the operating com-
panies, would no longer be required. Branson doesn ’ t really have a head
offi ce. Signifi cantly, his head offi ce used to be a houseboat, not a place
that one can load up with people.
Barnevik ’ s aversion to large head offi ces has been infamous. Accord-
ing to ABB ’ s ‘ policy bible, ’ an important guideline for acquiring com-
panies during his time at the helm, was the ‘ 30% rule. ’ In newly acquired
companies, this meant a dramatic cut of 30% of personnel to eliminate
some functions, another 30% cut to decentralize certain functions into
profi t centers, and yet another 30% reduction to create service centers
that would invoice services at market rates. Implication of the 30% rule
means that only 10% of the staff would remain. To illustrate this rule
in action, when Barnevik took over, he reduced ABB ’ s head offi ce to
a mere 150 people (before the merger Brown Boveri had 4 000 people
in Baden, Switzerland, while ASEA had 2 000 people in V ä ster å s,
Sweden).
Barnevik, Welch, and Branson were well aware of the fact that the
‘ psychological contract ’ between their employees and their organizations
had been changing. With merger and acquisition mania and the passion
for business process re - engineering, job loyalty had gone out of the
window. Job tenure and security were no longer to be expected. All
three executives realized, however, that a new form of security has to
be offered to make their organizations attractive. What these three
executives could offer was employability. They provided their executives
with portable skills. If the day would come when the organization no
longer needed the services of a particular employee, that person would
be better equipped to fi nd a position elsewhere. The implication of this
new psychological contract was, however, that companies needed to
offer learning opportunities (see later under ‘ All Change ’ ).
Structuring for Success
Welch talked about the ‘ boundary - less corporation, ’ meaning a structure
without the stifl ing costs of bureaucratic controls. The loose organiza-
tional architectures of Virgin and ABB would be of a similar nature.