Strategic management's attack on stodgy, "bureaucracy-hungry" middle managers is ironic. American Security Bank's historical record suggests that it was in fact hyper-entrepreneurialism, exercised by top management, that gave rise to many of the bank's current problems. If middle managers really were rigid, bureaucratically oriented actors, American's successes would almost certainly have been more modest.

This chapter analyzes the relationship between American Security Bank's growth and the decentralized bureaucratic management structure that was a vehicle for that growth.^[1] The relationship between growth strategies and corporate structure frames the central theoretical core of this book: the behavior of the firm structures and restructures management and explains the context in which managers can and do manage. The firm's behavior also provides the backdrop to the

politics of restructuring that emerged in the 1980s and explains why middle management became the target of those corporate changes.

Banking industry commentators have suggested that federal deregulation policies of the late 1970s and early 1980s contributed strongly to the decline of American Security's profits. The bank's strategic management also invoked this explanation to justify demanding changes in middle management productivity. Increased competition resulting from looser federal regulation of interest rates and the entrance of new banking and financial service firms, they argued, would undermine the high profitability experienced by American over the past decades. A general, industrywide experience cannot by itself explain American Security's decline, however. A more plausible explanation rests in the particular organizational form and growth strategies that ultimately limited the bank's ability to respond to an environmental change such as deregulation.

A historical study of American Security Bank's corporate form illuminates the ways in which Chandler's (1962) model of diversification and decentralization is an appropriate one for understanding the organizational developments of non-manufacturing, nonindustrial firms.^[2] As it did for many industrial enterprises, the decentralized corporate form enabled the bank, over many decades, to pursue strategies of geographical expansion, product diversification, and multidivisionalization. Challenged by shrinking markets in the 1970s and 1980s, however, American's decentralized bureaucracy faced important limits. Thus this study also points to the historical limitations of Chandler's model. If the current era of capital and industrial restructuring transforms the large decentralized firm, then organization theorists must prepare to consider a new corporate form.

Domestic Expansion

The size of a bank's deposit base determines the degree to which banks can realize profits through lending and investment.^[3] Between World War I and the early 1960s, American Security Bank erected the infrastructural means to develop a huge base of consumer deposits: its branch banking system, spread throughout the state of California.

American Security Bank's rapid expansion was in part due to a prosperous, burgeoning economy. California was one of the fastest growing states in the country: between 1940 and 1950, 19 percent of the U.S. population increase occurred in California, with an increase of nearly four million people. American Security's growth, however, was not an "organic" one, in which the bank simply responded to increasing market demand. Rather, American Security Bank's lending policies fueled California's growth, especially in the crucial areas of agriculture and housing. This fact is important to understanding American Security's growth: to profit from its large deposit base, American had to sell its product-to loan out that money quickly, at rates higher than the cost of its maintenance. Two developments enabled American Security to do this: the decentralized character of the branch system and aggressive lending policies.

By the 1960s American Security Bank had developed an extensive branch system, each offering a full range of services.^[4] (The bank founded some of its hundreds of branches and acquired and merged with others.) In a system described by the business press as "regimented autonomy," every manager and loan officer within American Security's branches possessed full authority to grant loans. Although the bank's central finance committee established the lending limit of each branch, actual decision making about borrowers was localized within branches.

That "autonomy" of the branch system made the bank's lending structure adaptable to many different regional factors existing around the state, giving it an ability to move very rapidly to secure business. A lending official in Los Angeles might know little about rural collateral, land appraisal, or how seasonal factors could affect a Fresno or Salinas borrower's ability to repay loans; to have to gain approval from such an administrator would significantly hamper American Security's efforts to dominate the lending business. From the bank administration's point of view, each branch manager should think of his or her branch as a bank he or she personally owned and should exercise discretion accordingly.

Indeed, branch managers in general possessed significant authority and responsibility. They were trained in the area of credit and managed employees in several functional areas within the branch, including credit (lending) and operations (assistant branch managers, merchant and individual account tellers, bookkeepers, and back-room payments processors). Furthermore, their lending work made branch managers modestly important community figures and linked the bank to regional economic prosperity in a relatively personalized fashion.

Thus the branch officials themselves had to be able to determine the creditworthiness of borrowers. With branch profitability calculated on loan-to-deposit ratios, branch managers were authorized and encouraged to increase sales of loans. Rapidity of decision making, made possible by the decentralized branch structure, greatly boosted this effort. The low cost of keeping deposits also promoted profitability. Regulation Q, legislated in the 1930s to stabilize the banking industry, placed a ceiling on deposit interest rates, allowing American Security (like other banks) to realize significant profits as they loaned their deposit money out at higher rates.

Expansion was further fueled by the existence of guidelines with which managers could make operations and personnel decisions-what Chandler (1962) calls tactical decisions (p. 11). The Standardized Procedures Manual outlined the centralized parameters within which managers could maneuver and make decisions appropriate to specific regional and market factors. Data on branch activities were forwarded to and monitored by central offices governing Northern and Southern California; these offices were responsible for updating bank policies and sending them to all branches. Personnel management similarly was decentralized and coordinated at the same time: each branch manager was able to hire, fire, and distribute wage increases within the salary matrix designed by central personnel. Centralized guidelines established the limits of decision making in this decentralized bureaucracy.

Any attempt to subject the growing number of branches to more centralized control would, in the eyes of the bank's strategic management, lead to monumental problems. In the late 1950s an executive vice-president was quoted in the business press, arguing, "If we tried direct central supervision over 659 branches spread out over 158,000 square miles, the administrative costs would be terrific, and the service would be terrible."

Bank officials noted the enormity of the personnel problem. In one year typical of this high-growth period, for example, over fifty branches were opened, each with the same hierarchical layers of management, tellers, bookkeepers, loan officers, and clerical help; strategic management predicted they would open thirty to forty branches with similar labor requirements in each of the following years. Expansion, and the subsequent corner on California's deposit and lending base, was sufficiently profitable to justify such duplication.^[5]

At the same time that American Security Bank was extending this structure throughout the state, the bank was marketing novel loan products. Their installment loan plan and a successful credit card program broadened the bank's small consumer loan base. American Security aggressively sold loans: advertising campaigns used newspapers, radio, and billboards to announce milestones such as "Today 266 cars will be financed by American Security" and "Every five minutes another American Security–financed car."

The institutional structure for which American Security Bank became famous was firmly in place by the early 1960s. The decentralized branch banking system was predicated on a semi-autonomous management structure that allowed the bank to pursue and maximize market opportunities. Tactical had been separated from strategic management (Chandler 1962, pp. 8–11): top-level management had created a global, profit-maximizing organizational framework within which middle, branch-level managers had significant latitude to carry out day-to-day operations.

Fueled by its access to California deposits and by its insistent sale of money, American Security became not only a phe-

nomenally profitable firm but one with a significant role in developing entire new systems of lending and credit that spurred the California economy. This role was a result of aggressive, expansionary decision making on the part of strategic management. American's growth was "purchased," carved out with organizational and lending schemes that would inextricably bind the bank to the very heart of the state's economy.^[6]

International Expansion

Reaching significant limits to growth and profitability in California, American Security Bank turned, as did many banks in the 1960s, to foreign expansion. American Security's international growth rates were notable. At the close of World War II American Security had one overseas branch, but by 1970 it had dozens of foreign branches and well over a hundred foreign banking subsidiaries. Two aspects of the international-expansion phase are striking. First, American Security Bank began pursuing international business comparatively later than other major banks. Banking observers expressed some skepticism about whether there was really room for another major U.S. competitor, particularly one that lacked experience with large accounts. Second, the bank's late entry led to questionable strategies for international profitability. One major business publication pointed out that American Security Bank initially planned to enter countries with limited capital and banking facilities and small economic risks. As it entered an increasingly crowded market, that cautious intent changed to the goal of being "flexible" to the international conditions that it encountered. American hoped to carve out a specialized market, to meet unique needs of corporate customers.

It is possible that to some degree American Security Bank positioned itself in niches where other banks would not go. American, Businessweek suggested, gained a reputation for being overly liberal with long-term credit, indicating much greater lenience with borrowers' creditworthiness. Despite the uncertainty, however, the international market was nevertheless a profitable one. Banks faced comparatively few restrictions on their overseas activities; profit margins on local currency loans in many countries were high compared with U.S. margins; and banks were taxed at lower rates.

The rapidity of American Security's international growth suggests an extremely aggressive expansion plan, paralleling earlier infrastructural domestic growth rates. Although American was among the last of the top banks to go international, by 1970 it ranked high among U.S. banks on the international scene. By that time, over 20 percent of the bank's profits were from overseas operations.

Domestically, strategic management no longer depended solely on rapidly expanding the California infrastructure. Rather it intensified existing profit-seeking activities and implemented organizational measures that extended the bank's markets. In the mid-sixties, for example, American Security

Bank began negotiating with banks around the country to extend its one-million-member credit card program. By 1970, American Security's highly successful marketing campaign had resulted in increasing the number of credit card holders by several million. Credit card operations earned over 5 percent of the bank's total operating earnings.

The California branch system did grow during this period. By 1970 American Security Bank was one of the leading contenders for California's $50 billion of available deposits.^[7] However, the ratio between branch growth and deposit growth had changed. Despite its infrastructural growth, American Security's share of the total available deposits was not increasing. The cost of maintaining its market share rose; branch growth allowed American merely to maintain rather than to expand its position.

In the late 1960s, American Security petitioned for and received approval to establish itself as a one-bank holding company. As a parent company for the bank, the one-bank holding company could sidestep some of the restrictions imposed on banks per se, to diversify into profit-making activities traditionally viewed as outside the scope of commercial banking, such as leasing, insurance, real estate, warehousing, and mutual funds (Roussakis 1984). The organizational arrangement permitted American Security to enlarge the scope and number of profit-making centers.^[8]

Thrusting control of branch operations even further down the bank hierarchy, American Security's leaders adopted a policy of regionalization. Rather than maintain control over policy decisions from centralized headquarter offices, strategic management redistributed responsibility for senior credit authority and staff into regional offices throughout the state. Each regional office controlled eighty to a hundred branches. Bank administrators noted that this was one of the most significant shifts in authority ever implemented in the bank.

By the beginning of the 1970s strategic management had parlayed American Security Bank into a major U.S. bank. Yet the records on American Security's growth strategies suggest a struggle to maintain profitability and a volatility in the successes achieved. American Security had to expend greater resources simply to maintain its market share in California; faced with limits to its own growth in the California market, strategic management had ventured into a crowded international market; and it had acquired the organizational and legal apparatus to seek new nonbanking profit centers. The next era of growth must be viewed as decisive for American Security Bank: strategies of that period represent a response to comparatively limited possibilities for expansion in the context of an increasing struggle for profits.

One Step Forward, Two Steps Back: Growing but Losing Ground

Capitalizing on existing structures and practices, over the next ten years the bank followed a trajectory of profit maximization that had been taking shape for several decades. Between 1970 and 1980 American Security's assets and profits quadrupled, and the number of bank employees doubled to well over 50,000 in yet another aggressive expansion program. In the last five years of the period alone, net income nearly doubled.

These achievements were based on strategies that gave rise in a very dramatic way to the profitability crisis of the 1980s. The institutional and policy apparatus that nurtured those strategies was already firmly in place by 1970. But a new dynamic characterized the 1970s: growth in lending was used to obscure lack of growth in deposit markets. In addition, strategic management maintained high short-term profit margins by neglecting investment that would bolster the long-term health of the bank. It did not invest in technology that the rest of the banking industry was already adopting, nor did it prepare for the forthcoming deregulation of interest rates.

By the mid-seventies, operating authority lay in the hands of unit managers at over one hundred "profit centers" around the world (which included new subsidiaries owned by the bank holding company), while control of capital and important credit decisions remained under the purview of headquarters.^[9] Branch managers were given still broader authority over promotions and salaries, while domestic lending officers were given higher loan limits. Lending authority in foreign operations was similarly decentralized: by 1975 only 20 percent of foreign transactions were routed to senior management for approval.

That downward movement of decision making, resulting in the creation of autonomous profit centers, perhaps best explains the enormous increase of personnel that took place during the decade: the number of bank employees nearly doubled. One influential business publication also reported that branch managers were compensated on the basis of size, suggesting that branch managers built up their staffs to implement strategic management imperatives. The bank had established a notable orientation toward increasing revenues and focusing less on daily costs and productivity; that orientation was protected by ongoing growth. In other words, this large and prosperous firm was trading off efficiency for expansion and profitability.^[10]

With a massive, decentralized corporation, increased latitude in loan making, and a strategic management that relied on lending as a growth strategy, the bank achieved the zenith of its loan portfolio in the late 1970s. During a brief four-year period, the bank doubled its agricultural lending, accumulating a high concentration of agricultural loans that would make American extremely vulnerable to any collapse of farm property value.

During the same period, the bank extended many billions in foreign loans, often to small borrowers in Latin America and Africa who were considered high credit risks. The bulk of American Security's foreign loans were to private borrowers, compared with other banks' loans to governments and public entities. American Security Bank continued to fill a gap in the international banking scene. International growth was spurred by a special division that served multinational corporations. This multinational unit, set up in the early 1970s, followed the logic of regimented autonomy of the branch system. Multinational account officers reported to a senior vice-president of multinational corporate banking in headquarters. Yet the account officer, located near clients' headquarters around the world, held credit authority, approving or disapproving all credit transactions.

Other organizational policies highlight the shaky foundations of the intensification of lending as the principal growth

strategy. Several large units in California, for example, were making substantial real estate construction loans with little coordination between them. This duplication eventually resulted in great concentration of loans in certain sectors, with a low regard for tracing accountability. An emphasis on amassing assets led to a disregard for quality and for any considerations of how American's huge loan portfolio would survive the coming climate of deregulation. Business observers pointed out that American Security Bank's loan officers tended to be generalists who were spread out across the entire branch system, whereas lending officers of other banks were trained as industrial and sectoral specialists.

The strategy of increasing lending levels is one indication of a short-term perspective on profitability; another is the neglect of technological investment. American Security was slow among the California banks to institute automated teller networks. Furthermore, some information-intensive sectors within the bank were still not computerized. Strategic management's reluctance to reinvest earnings and take a cut in immediate high profit rates meant that the administration of the 1980s would have to take up a big technology slack.

The exceptional profitability of American Security Bank at the end of the seventies masked two problems that extracted severe costs over the following years. American Security's loan portfolio, built on an extremely decentralized lending structure, depended on volume rather than quality. Increasing volume was encouraged by incentive. Strategic management relied on earnings growth in consumer and overseas lending to write off other loan losses; the bank was able to absorb losses throughout the decade without significantly diluting profitability.

Second, profitability was in part fueled by lack of reinvestment. Little if any capital was devoted to improving the existing institution, creating catch-up costs that put a strong damper on earnings in the 1980s. Furthermore, the extensive branch system, on which this bank depended for its huge pool of deposit money, seems to have been neglected. By 1980 American Security's share of California deposits had dropped to under 40 percent; thus the bank's very infrastructure and financial core was weakening. American would also have to contend with its deposit market in the early 1980s, when banks and other financial institutions began aggressively to compete for the core of money American Security had always taken for granted.

Retrenchment and Recentralization: The 1980s

The upward earnings trajectory ended abruptly at the turn of the decade. The chief executive officer who had presided over American Security's phenomenal growth during the 1970s left the bank in 1980, the best earnings year American had ever experienced. When Robert Wedgewood^[11] stepped into the position in 1981, one of the first noteworthy events he presided over was the announcement of a steep decline of earnings. That was surely an extremely painful admission for Wedgewood, who had worked his way up through the ranks of American Security Bank over the course of many years. Considered by many to have been perfectly groomed for CEO, his career nurtured and watched carefully over many years, he now faced a financial scenario that departed dramatically from American Security's heyday of economic growth and prosperity.

With the exception of one slightly improved year, bank earnings continued to decline; over the next five and a half years, American Security wrote off billions of dollars in loans in precisely those areas where loans had been concentrated in the 1970s. The bank posted not only the reverse in earnings but also profit losses that raised the specter of Depression-era financial ruin. In a climate in which several major banks had either collapsed or been rescued by federal authorities, developments at American Security precipitated much speculation on the part of federal regulators, shareholders, Wall Street observers, and the public about the possible demise of the bank.

The large loan losses limited American Security's ability to maneuver in a deregulating financial services environment. Regulation Q was phased out, gradually eliminating interest rate ceilings on deposit accounts. The Garn-St. Germain Act of 1982 allowed other institutions-savings and loans, credit unions, manufacturing corporations with finance companies, and retail firms such as Sears-to engage in activities historically restricted to commercial banks (such as deposit taking, offering checking accounts and traveler's checks, financing, and lending) (Roussakis 1984). These developments forced American Security to compete for more of the California retail market: the bank had to begin paying more for its money and to develop new products in the form of special accounts and services.

How would strategic management redress the problematic profitability strategies of the preceding decades? Unable to rely any longer on building its infrastructure or lending portfolio to expand profits, top management also had to face the fact that the extreme decentralization policies of the past had weakened the bank's financial core.

One painful necessity was at the heart of the 1980s strategy for recapturing bank profitability: reducing the size and the decentralized character of the bank branch system. A senior level "retail action team" was organized to consolidate the branch system, to cut and redeploy staff, and to reduce the cost structure of retail banking. The team had to decide which branches would be closed or stripped down, basing its decisions on factors such as a branch's proximity to other branches, the cost of the premises (American Security owned some branch buildings and leased others), and the rate of branch growth.^[12]

To reduce the branch system, the action team closed some branches outright or turned them into "convenience centers" (branches with one or two human tellers, several electronic tellers, and very limited services); it removed various branch functions, centralizing loan making, for example, into lending centers and personnel decision making (promotions, hirings, and raises) into area management groups. Although branch closure did not get under way until late 1983, by the end of 1984 strategic management had closed or consolidated several hundred branches.^[13]

Closing branches, however, could only be a partial solution. Unlike firms that have the option of closing down production sites when demand declines or when profit crises prevail (Zipp and Lane 1987), American Security Bank's prosperity depended in many ways on maintaining proximity to customers. Branch closures meant sacrificing customers. And in the face of stiffer competition from other banks, maintaining customers was an important part of regaining American Security's market share. Partly for this reason, strategic management focused more intensely on issues of productivity and overstaffing.

The bank began to target its least and most profitable business operations by identifying and stratifying its consumer markets. For the "mass market," strategic management regrouped lending authority, which had been widely dispersed throughout the branch system, into highly rationalized and depersonalized lending centers. Formerly, anyone entering a branch for a loan would negotiate with an on-site lending officer; in the restructured bank a customer had to do business with any one of a handful of regional loan centers, specialized for auto loans, home loans, and so on. In essence, the retail action team "deskilled" the branch by removing lending activities, thus causing a general degradation of financial services for the less than wealthy.

Affluent customers gained access to personalized lending services when "private banking" and "customized" financial services centers, serving the top 15 percent of American Security customers, were set up in area management groups. These small lending groups catered to privileged customers and offered correspondingly elite financial services such as money market accounts, investment counseling, brokerage and securities services, asset management and financial planning, and personalized lending services.

The economic justification for consumer segmentation was clear. As noted in the bank newspaper, whereas the "mass consumer market" (households with less than $25,000 in annual income, of which the retail action team fretted that it had a disproportionate share) made up 47 percent of available business and only 22 percent of potential profit from the retail market, so-called mid-scale and upscale markets constituted 53 percent of available business but 78 percent of potential profit.

Bank leaders similarly consolidated the international division of the bank by centralizing the most important world banking units and installing one chief administrative officer to oversee them. As they had done with domestic markets, strategic management stratified the bank's international customers and foreign countries into market tiers. Tier 3 consisted of countries with whom American Security wanted to terminate relations; tier 2 customers were to be scaled back; international operations would focus primarily on profitable tier 1 countries.

Within the first few years of the Wedgewood administration, strategic management poured several billion dollars into technology research and development, advancing the technological forces that would lead to domestic and international centralization. The rapid proliferation of automatic tellers testifies to top management's interest in increasing the bank's competitiveness through technology. In 1980 American Security Bank had no electronic teller system; by 1985 American had one of the most extensive systems of any bank in the country.

One very important product of that technological catch-up was SystemsGroup, a new division to develop the bank's technology, which was established in 1983. This center, employing several thousand people, housed numerous projects devoted to integrating the bank's operations and improving information management, data processing, and state, national, and international communication. On the international front, for example, SystemsGroup developed data-base linkages between major bank centers in Europe, Asia, Latin America, and the United States. Strategic management claimed it had no choice but to develop these information and communications linkages, called the "electronic pipeline," given the pressures for profitability and competitiveness. SystemsGroup designed electronic delivery and payments mechanisms for American Security Bank customers, as well as in-house office automation using microcomputers and time-sharing services, all designed to link management together.^[14]

Managers as Agents and Objects of Change: Personnel Management in a Contracting Corporation

Organizational restructuring was paralleled in top management's attempt to restructure the behavior and culture of middle management. Middle managers were to achieve, in individual work sites, what top management was trying to achieve for the corporation as a whole: a leaner, more productive work force.

Strategic management publicly proclaimed that it would uphold the bank's long-standing "no-layoff" policy. This commitment to paternalistic, lifetime employment patterns seemed to signify that top management refused to make employees suffer the consequences of the reorganization of the bank. Yet along with this explicit commitment, strategic management developed a covert plan for cutting personnel, charging middle managers with "managing up or managing out": increasing productivity or firing new categories of unproductive employees.^[15] Thus strategic management looked to managers to take responsibility for managing out so-called unproductive workers (including managers themselves) and simultaneously professed that layoffs would be a policy of last resort.

Managing up did not mean promoting an employee into a higher position; rather it meant raising an employee's productivity in his or her current position. Under a new regime of pay for performance or pay for merit, managers were to parcel out bonuses irregularly for improved results. In this way, strategic management hoped to persuade employees at all levels of the bank to work more productively, rather than reward employees solely by promoting them into the upper levels of the corporation. Pay for performance was a fitting incentive in a corporate climate of decreasing opportunities for mobility.

Also appropriate to the new corporate climate were emphases on the benefits of lateral as opposed to vertical mobility. Corporate personnel touted lateral mobility as an often more attractive option than upward mobility; part of middle managers' new role in managing contraction was to help managerial and nonmanagerial employees alike see the virtue of developing their careers through horizontal mobility. Since the ideology of open job ladders and promotions constitutes an important mechanism of control, limitations on upward mobility presented a new personnel dilemma for middle managers (Rosenbaum 1979; Greenbaum 1979; Scott 1985).^[16]

As the agents of corporate contraction, managers were also to isolate and manage out their "nonperformers," unproductive workers who allegedly drained corporate profitability.^[17] But the unproductive workers to be managed out were not simply uncooperative or negligent: in a new definition, the "poor performer" was one who fell at the bottom of a ranked curve (the "Bell curve"*) of employees in each unit. Position on the curve determined whether one should be managed out of the firm. Managing up or out, using this scheme to penalize and push employees, would allegedly give managers the daily, micro-level tools to move American Security from a paternalistic growth-based system of personnel policies to one characterized by diminishing opportunities and promises.

Thus rather than resort to explicit layoffs strategic management used two interim strategies to cut the size of American Security Bank's personnel. It was going to rely on attrition-not only normal attrition but attrition somewhat accelerated by the redeployment program-and on lower-level managers taking an assertive stance toward the bank's allegedly unproductive workers. Oaklander (1982) points out that companies often try to reduce staff by attrition as a prelude to layoffs. Managing down through attrition can be time-consuming, however, and companies adopt other methods to accelerate the attrition process (Oaklander 1982, pp. 187–214). Managing out, as a type of disguised layoff, was such an accelerating method.^[18]

In addition to serving as agents of corporate change, managers were also the targets of that change. The bank's new corporate culture agenda expressed the contradictory dimensions of middle managers' position. Evoking an ideology of the bank as a rigid, overstaffed, bureaucratic institution, strategic management argued that the bank's current crisis could in part be explained by middle management's behavior. Top management conveniently ignored the fact that organization building at the middle managerial level was an understandable response to strategic management's own growth policies and claimed that the bank had become a stagnant corporate morass because of middle managers' behavior. Over the past decades of growth and allegedly automatic profits, top management argued, middle managers had complacently added more and more employees to their units, neglecting any standards of efficiency or competitiveness. The only way the bank could redress this problem was to transform its managerial culture.

Members of American Security's top management went public about the damaging effects of the disease of "managerial complacency." They, and other commentators, compared the bank's middle management to stifled and overbloated civil service bureaucracies. Images of American Security Bank as an "overweight giant, with arteries clogged by bureaucracy," a "bureaucratic octopus," and a "stumbling bureaucracy" dominated descriptions in the business columns of regional newspapers and of national publications such as the Wall Street Journal, Businessweek, and Fortune . The Wall Street Journal went so far as to conjecture that the effort, on the part of the bank's strategic managers, to change American's bureaucratic culture was "the corporate equivalent of Mao's cultural revolution." In this perspective, the perpetrators of a sluggish bureaucracy were the massive middle ranks of managers in the bank. They were responsible for maintaining a complacent and passive stance toward managing the bank's operations and employees.

Proclaiming to bank employees and to the financial community at large that business as usual-i.e., the banking business of a regulated era-was over, CEO Wedgewood decreed that the "old" culture of the regulated banking period had failed. It had created rule-bound bureaucratic managers who could not make decisions efficiently or seize opportunities for change and innovation. Wedgewood was cited in Fortune magazine as saying that

the existing culture would have preferred to sit back and let me make all those decisions: "Tell us what to do and we'll do it." That was fine but you're not going to develop people that way, you're not going to develop any innovative entrepreneurial approach, and you're not going to develop feedback.^[19]

The tool with which managers were to operationalize the new corporate culture was a theory of new management style: "situational leadership,"* which called for abandoning bureaucratic management by rule, substituting it with management by judgment, or instinctual management.

The top leaders of the bank urged middle managers to move away from the stifling, nonentrepreneurial mentality of the culture of rigid rules, embodied in their reliance on the Standard Procedures Manual (SPM) . The SPM had functioned as a centralized guide on which successful personnel practices in a highly decentralized organizational structure depended. Strategic management claimed that the SPM inhibited creative solutions to the burgeoning of personnel problems resulting from the current restructuring of the bank. As Wedgewood stated in an in-house newsletter, "Managers will learn to rely more on their own judgment, within the context of corporate values, and less on the SPM and other procedures." The head of corporate personnel concurred in the same newsletter: "No written materials can ever replace the manager's own judgment in managing employees. Managers need to consider each situation individually and determine what's right within the overall corporate culture."

Superimposing the rhetoric of autonomy over an organizational context of uncertainty and contraction, strategic management appealed to managers' professional sensibilities, urging them to act as entrepreneurs and risk takers in order to ensure the bank's survival.^[20] Herein lay the ingredients of a regime of coercive autonomy. Strategic management was shifting control upward and centralizing functions, processes that removed control, concrete guidelines, and certainty of the future from managers and that undermined their ability to provide significant incentives for working harder. And it was precisely under those conditions that strategic management exhorted lower-level managers to enlarge the discretionary elements of their jobs: to become more innovative and to adopt an aggressive and independent stance toward managing out unproductive employees, in particular, and increasing productivity in general.

Industrial sociologists and others studying the labor process have proposed different conceptualizations of control strategies in the modern workplace. Because they refer almost exclusively to the ways that managers control nonmanagerial workers, these models have limited value for understanding control over managers themselves. Braverman's (1974) notion of the separation of conception and execution, Edwards's (1979) models of direct, technical, and bureaucratic control, and Friedman's (1977) direct control and responsible autonomy strategies have all attempted principally to explain why, how, and when different categories of nonmanagerial workers have been constrained within different social relational and technological contexts across divisions, firms and industries of capitalist society.

To be sure, the notion of bureaucratic control has great applicability to the position of white-collar, professional, and managerial workers. Many workers in these categories are employed by large corporations, in positions where job tasks, compensation, and mobility are governed by a systematized, bureaucratic body of rules and regulations. Bureaucratic systems of control function as much to coordinate the interests of managers and professionals with those of the firm as to coordinate the interests of management and production workers.

But as both Edwards (1979) and Osterman (1988) point out, bureaucratic control systems typify very large prosperous firms that have the financial latitude to treat labor as a fixed, stable cost, rather than firms that must continually struggle to increase productivity and pump profits. Bureaucratic control, in sum, is more likely to exist in profitable firms with huge market shares.

Coercive autonomy supersedes bureaucratic control as a strategy of control over managers. It is peculiar to the recent era of corporate restructuring and global competitiveness. Coercive autonomy relies on a postbureaucratic, individualizing language; it explains the current configuration of corporate managerial practices in the competitive, contractive, restructuring era in a way that Edwards's bureaucratic, growth-based model of control cannot. Although it advocates autonomy, it is a highly restricted definition of autonomy in that it directs managers to exercise discretion toward very specific goals of top management. It is, moreover, a coercive model because of the contradictory nature of the demands: managers are to exercise their discretion autonomously, while they are themselves more closely surveyed. Finally, rather than allow managers to focus on the stable and regular execution of tasks (Edwards 1979), the new framework of coercive autonomy pushes managers to focus continually on increasing productivity, initiative, and profitability with the ultimate effect of forcing them to individualize and personalize their management relations.

The new culture of autonomy, calling for flexible, decentralized management methods in the highly restricted context of centralization and cutbacks, obscured the ways in which the historical organizational legitimacy of managers' role was being undermined. Throughout the many decades of expansion, the structure of the institution had provided managers an important source of authority and legitimacy. Individual managerial authority was reinforced by the certainty that the organization would pay for effort and by implicit and explicit guarantees of job security. Thus the bureaucratic terms of employment in this large bank virtually assured specific rewards and opportunities to those who met the expectations of their job.

In the new era of competition, strategic management attempted to make middle managers rely much more on individual legitimacy or management by judgment. Individual legitimacy would ideally obscure the negative effects of the decrease in predictable rewards and opportunities, as managers individually and personally absorbed the dilemmas of life in an uncertain and capricious organization. Finally, the language of the new culture obscured the effects of corporate contraction on managers' own futures.

Thus organizational and ideological restructuring were the twin pillars of American Security Bank's downsizing. By organizing a series of one-week-long management training seminars, strategic management relayed the principles of the new corporate culture, the new management methods, and the economics of corporate decline to all managers of the bank. Representing a systematic attempt to rebuild management on a grand scale, the seminars brought corporate structural changes to bear on micro-level management practices.