(FORTUNE Magazine) – From early childhood on, our children are taught to equate progress with promotions. Playtime, nursery, prekindergarten, and kindergarten--a series of grades recognize the child's growth and prepare each student for the "real" ladders that lie ahead.

A playground conversation I overheard while in graduate school (21st grade, by my calculation) captured some of this early training. "Are you in first grade?" an evidently awestruck preschooler asked a taller companion. "Higher than that!" the other replied, puffing up his 7-year-old chest with pride. Given the experience gap between them, that second-grader wisely refrained from giving a detailed explanation of the steps that lay beyond the younger child's horizon--let alone the means of ascent.

In today's world, unfortunately, the means of ascent frequently translates into counterproductive behavior. How? Corporate reward systems often sanction inefficiency because so much of rank depends upon the number of people in some pyramid.

Let's look at the accounts-payable departments of two similarly sized corporations. One employs six people operating a networked desktop computer system linked directly to vendors, while the other employs five times that many people, including four supervisors, to do the same job. In addition, the latter operation requires an expensive mainframe. Which department's manager, do you suppose, would command a higher level of reward? In most cases, the "greater responsibility" of running the larger-size organization would give that department's head a larger salary as well as improved chances for promotion to yet higher positions.

Improving the latter organization's efficiency, therefore, may well bring the risk of demotion to its leaders. Small wonder that most middle managers fear the loss of status that frequently accompanies new work styles. Rank, as they say, has its rewards.

Herman Wouk captures this rank consciousness in The Winds of War, a sweeping historical novel of the events leading to the Second World War seen through the eyes of a U.S. Navy captain. If fictional characters ever gathered at some mythical cocktail party, Wouk's hero could have dropped names with the most traveled of his compatriots. Hitler, Churchill, Stalin, and Mussolini--Captain Victor Henry meets them all, thanks to a series of missions for Franklin Roosevelt. But Henry keeps fretting. Will the next assignment bring him closer to the command of a battleship? Even a front-row seat at the greatest drama in modern history couldn't divert his attention from the career ladder he grasped on his first day as a midshipman.

We may smile at such concerns, but striving animates achievers in most organizations. Like the U.S. Navy, therefore, corporations still count heavily upon promotion as a key incentive. But downsizing, and the evident economic advantages that stem from flattened organizations, combine to curtail promotion prospects. So the majority of today's entrants into the job market can't look to rank for reward, at least not in the traditional sense. Instead of mastery over others, future managers might better look to mastery over circumstance --problems solved and skills gained.

At the risk of wishful thinking, I speculate that the power to accomplish a complete task may compensate for the "power" that once came with gold-braided sleeves. In bygone days, every layer in the hierarchy occupied itself with massaging messages as they moved from one specialized group to the next, so work offered relatively limited satisfaction. With never more than a piecemeal part in any task, no wonder that yesterday's organization man looked to organizational status for reward and guided his actions by whatever might most please his boss.

But today businesses need to encourage people to look outward rather than upward. In this environment, work becomes more team based, with coaching--rather than detailed direction--from above. Consider Compaq's sales force. On the theory that it hired salespeople to talk to customers, Compaq closed its sales offices and instructed its salespeople to work out of their homes instead. To support this home-office arrangement, the company gave each of its salespeople a fully equipped computer and networked access to comprehensive databases. In that way, each salesperson can now review complete and up-to-date corporate data on a given client moments before making each sales call.

The result? Having a sales force just two-thirds its earlier size helped Compaq double revenue during a time when unit prices were cut in half. All in just a bit more than two years. With fewer internally generated demands upon their time and direct access to needed information, each Compaq salesperson sold six times as many computers as under the old system.

While each of Compaq's salespeople works from home and remains free to schedule the day without asking some boss's permission, none works in isolation. All relevant information lies within immediate reach. It just takes a few keystrokes.

With all of Compaq's information systems tuned to supporting the company's sales effort, I can imagine a new kind of pyramid. In the old model, reports and memos were meant to keep all levels of the pyramid up to date. Now, instead of shipping messages up and down through multiple layers of subordinates and their superiors, this new arrangement shapes and shares information for the benefit of the person who deals with the customer. Here, the career ladder lies sideways. Managers get rewarded for taking the initiative, collaborating with colleagues, and providing service to customers. Hopefully, we can shape tomorrow's work environment to offer a greater supply of similarly empowering opportunities throughout our economy. What will it be like to work in this new environment? Already, new work styles are emerging well before organizational theorists can give them labels. As innovative humans try various approaches and imitate those that appear to suit them best, I speculate that some combination of global coordination and local teamwork will emerge. In this connection, most of the managers I see these days spend the largest portion of their time looking sideways--that is, meeting with peers and customers--rather than dealing with the parochial concerns of their particular specialty.

In this customer-focused world, managers will spend more time moving along a horizontal ladder--doing projects with people from different departments in their organization--than climbing a vertical ladder to the top. My own experience at Bell Labs mirrors this trend. Like that of most of its corporate contemporaries, Bell Laboratories' organizational makeup employs a familiar multilevel hierarchy. Moreover, our long tradition of specialization has weighed heavily against radical changes in the status quo. As recently as the mid-1980s, therefore, most researchers worked to enhance our owners' chances for long-term success as we always had--alone or in small groups, and only working with others when a project required outside help--all the while maintaining the organizational style that had served us so well in the past. As time went on, however, it became clear that this traditional mode of operation had failed to meet our expectations. Bell Labs wasn't providing an unleashed AT&T with the dazzling array of new products that pundits had predicted in the heady days following the old Bell System's breakup. What to do? For a while, we contented ourselves with waiting for our colleagues to patch the leaks in their part of our corporate boat. When we finally took a dispassionate look at ourselves, however, we found traditional behaviors ill suited to the real needs of our enterprise.

Not unlike departments of other compartmentalized organizations, each research group worked to exploit opportunities as its people saw them, with little attention paid to others. One area of technology might receive attention from multiple groups, while another might receive none at all. The situation called for change. No matter how well the past work styles had served us, they no longer sufficed. But that didn't mean trashing our organizational structure. Instead, we concentrated on giving each part of the organization a needed outward-looking focus. Among other things, each research manager had to take on an additional assignment. Instead of just striving to make sure that each scientist and engineer in a given department worked at the highest level of accomplishment, managers took responsibility for fulfilling AT&T's technology needs in areas assigned to them.

The change didn't take place overnight, but over time our behavior has changed radically. Today about half our researchers work full-time in partnership with colleagues from other parts of AT&T. Similar changes have taken place in management as well. While most research managers have kept their titles and the trappings of office, their jobs have undergone 90-degree turns. Instead of looking up and down, so to speak, they now spend most of their time looking sideways.

For example, each research director now works with one of AT&T's business units, making sure that its needs get attention. The directors also make sure that Bell's researchers have access to potential customers for their work. These directors work not just for the sake of the people in their own organizations but rather for the research operation as a whole. With organizational roles now more clearly defined on the basis of function rather than scientific discipline, management's primary attention has shifted to external interactions.

Recasting first-level management roles has proved the most challenging undertaking. Experienced researchers themselves, managers had worked hard to ensure the best possible research in their departments. But "best" as they defined it. In one particular case, this meant producing the world's most powerful laser diode--a record-breaking experiment. It won the "best paper" award at a major professional conference. While certainly not unworthy, this internally generated pursuit of excellence paid insufficient attention to the priorities of potential customers. While colleagues in our Lightwave Business Unit sought more powerful lasers, they might have preferred to trade some of that device's performance for compatibility with their existing fabrication methods.

Since the researchers saw themselves as guardians of traditional excellence, they naturally regarded this new focus on the marketplace as a lowering of standards. But over time the new ideas took hold. Building a manufacturable record-breaking laser presents a far greater challenge than building one that just works long enough to get a paper published, after all.

The new mode of management employs much of the old style and value system. Everyone still strives to be the best, but under new and more demanding criteria. Attention that once focused largely on internally generated standards of job performance has shifted toward interorganizational teamwork at all levels. Quite a change from the days when management sought to protect researchers from untoward contacts with the outside. Like our corporate colleagues, we strive to adapt ourselves to a new era, one that combines a small-scale entrepreneurial spirit with the large-scale coordination required by massive global enterprise.

While large corporations will continue to exist in the future, they will behave quite differently, a factor that will change one's career expectations dramatically. No so long ago, big companies could offer their employees lifetime employment. They could, in effect, afford to buffer their people from the vicissitudes of the marketplace.

Conventional wisdom generally associates an organization's large size with insensitivity to its surroundings. As a matter of fact, the laws of physics lend some support to this notion. When Hannibal crossed the Alps in 218 b.c., this celebrated Carthaginian general led an army recruited from North Africa and Spain, complete with elephants. Proceeding across Gaul, he marched southward over the Alps to attack Rome from the landward side of the Italian peninsula.

Though Hannibal won several famous battles, the campaign turned out badly--especially when some of his elephants panicked and charged in the wrong direction. Nonetheless, the image of these huge creatures marching through the snow amid a horde of evidently freezing soldiers has given us one of ancient history's most enduring images.

This historic encounter with cold weather didn't seem to bother these walking tanks--even though they had come from tropical climates. Why? Because every square centimeter of elephant skin exposed to the elements could count on many times more body mass to replace lost heat than could that of their human counterparts. Sheer bulk, in this case, reduced the influence of the external environment.

Today, some monolithic organizations still find themselves insulated from their environment for much the same reason. Sheer organizational size, it seems, provides much the same insulation that Hannibal's elephants enjoyed. In such organizations, employees expend too much time on internal issues. They turn a blind eye to the changes occurring around them. Small wonder that an organization man could once look forward to spending the entire interval between graduation and retirement behind a desk.

Still, size may not be quite as much of a handicap as this image of a corporate elephant might suggest. What matters is not so much size but the distance between individual employees and their customers. As a result, each corporate organization needs to prune its "insides" so as to enhance its surface area. Unlike the organization man who pursued his career safely ensconced in a corporation's inner workings, tomorrow's job seekers would do better to go where the action is--just as organizations will perform best when coupled to their environments as efficiently as possible.

In Bell Labs' case, only a shrinking minority of research physicists study physics today. While we continue to pursue scientific excellence in fundamental areas, most of our scientists seek breakthroughs in targeted areas--such as the special lasers that have brought light wave technology to the cable television industry. With billion-dollar contracts riding on who can supply the best technology at the lowest price, today's scientists can hardly afford to behave as they did when we were the only game in town. While our size remains the same, therefore, our customer environment gets a far greater share of our attention.

The more an organization devotes its resources to customer contact, the more monolithic work styles must make room for more flexible employment relationships. While increasing numbers of workers will need ready access to wide-ranging information resources, optimal information sharing needn't demand one's physical presence in some corporate office complex. One of the researchers in our Murray Hill, New Jersey, Computer Science Research Laboratory telecommutes from an AT&T facility in Taipei. Tomorrow's interactions may depend far more on shared understanding than on sharing the same office corridor.

On a superficial level, most 21st-century enterprises still seem likely to employ large numbers of professionals as office workers. But the definition of office should broaden considerably. Imagine yourself as an employee in one of tomorrow's firms. What does a conventional office offer you? A typical list of features might include the following:

Work in progress--a half-finished report, letters in need of reply, stacks of reading material, and so on.

Access to people--the formal and impromptu meetings held in and around the area.

Access to facilities--computers, copiers, fax machines, and all the other necessities of modern office life.

A messaging gateway--entry point for mail and phone calls.

I could go on, but a longer list would support the same observation: Each item now lends itself to increasingly effective electronic substitutes. The advent of electronic writing tablets, optical character recognition, electronic storage of documents, and the like will keep all the "papers" you need as close as your computer notebook.

As I see it, then, tomorrow's worker will have the power and independence to spend more time away from the office, to connect more with customers, partners, and suppliers, as well as with professional colleagues. In such a dispersed environment, managers' ability to create coherence through shared vision and a common set of professional values will rank among their most important career assets.