| Revolution and
Evolution As Organizations Grow
Leo J. Borrell, M.D.
President, Equity Investor & Consultant:
Healthcare Equity Investors
Cosmetic Surgery & Health Service of America
Positive Changes for Health & Beauty
Board of Directors,
Interactive Health Systems
Essentials for Success in Rapid Growth:
1. Vision - Action - Goals
Sir Claude: "If you haven't the strength to impose your
own terms upon life, you must accept the terms it offers you."
---- T. S. Eliot, The Confidential Clerk
A Long-Range View With Suppression, Anticipation, Altruism,
and Humor
"Maturity is the ability to postpone gratification"
- Attributed to Sigmund Freud
2.Ability to Tolerate Stress (Anxiety) & Losses
(Depression)
Successful Adjustment
3. Emotional Stability
"Occasionally I would start thinking how such dull people
could make money. I should have known that money-making has
more to do with emotional stability than with intellect."
---J. P. Marquand, Women and Thomas Harrow
E-Commerce Growth
Pro E-Commerce
The case for jumping on the E-Commerce bandwagon continues
to build, according to International Data Corp. (IDC) of Framingham,
Mass. The information technology market-research company anticipates
that commerce conducted over the World Wide Web will reach
more than $400 billion by 2002.
People accessing the Web will grow from 100 million at the
end of this month to 320 million by 2002. The number of users
purchasing goods & services via the Web will grow to 128
million by 2002.
Selecting a Staff for a Rapid Growth Company
When a company is growing rapidly, sometimes not everyone
grows along with it. A company that expects to increase sales
dramatically needs employees who have the flexibility to fit
into bigger roles. Lay out the new responsibilities and what
skills are required. Talk about the mismatch and ask the employee
what is needed to get him up to speed. Specify a deadline.
Hire for what you envision the job to be a year or two down
the road. Look for employees who have a lot of potential.
Initially they could be paralyzed, but if the new environment
encourages risk-taking, the employees could become entrepreneurially
driven. Look for employees who are flexible. Look for employees
who show signs of being learners. Ask job applicants how they
have improved their skills during the last year, or how they
solved a problem they encountered at work, and what they learned
from these experiences.
Policies for an Entreprenurial Company
Recognizing & Avoiding Organizational Decline After
Rapid Growth
Topics:
- Observations of Organizational Decline
- Reasons for Organizational Decline
- Early Warning Signals
- Intervention Alternatives
- Underlying Beliefs that Safeguard Against Decline
Observations of Organizational Decline
Conventional measures such as total sales, profitability,
market share, and loss of technological leadership all indicate
this deterioration. Leaders blame these setbacks on largely
uncontrollable elements in the external environment such as
currency fluctuations, interest rates, and low-cost foreign
competition. Often the change in climate may have prevented
management from acting when the necessity for doing so should
have been obvious.
Causes of Organizational Decline
Paradoxically, competitive success itself may trigger organizational
decline by encouraging complacency. 5 specific factors play
a role in organizational decline:
1. Decline, Entrapment, Self-Deception: Indications
of decline, often obvious to the objective observer, are discounted
by responsible top managers, usually because of some commitment
to an outdated view of the business's basic nature.
2. Hierarchy Orientation: By this, we mean
the use of decision criteria based primarily on the perceived
desires and politics of the organization hierarchy, rather
than on basic business demands. New employees may no longer
absorb the sense of urgency that gripped the founders.
3. Cultural Rigidity: With economic success,
a change in emphasis from innovation to tightened administration
tends to create an increasingly rigid culture. The new culture
inhibits the rapid changes often necessary to respond to a
rapidly changing business environment.
4. Desire for Acceptance: Conformity: If top
management is perceived to be averse to change or criticism,
then potentially independent voices within the organization
will not be heard.
5. Too Much Consensus and Compromise: The
result of this can be a gradual increase in the amount of
time key managers spend on planning meetings. The need to
achieve consensus causes bickering and waters down managerial
responsibility.
Taken together, these 5 factors gradually separate managerial
employees from basic, immediate business goals. Also, the
momentum generated by success may mean that individual employees
feel no sense of urgency. However, sustaining dynamism often
requires high levels of energy and effort, and the difficulty
of sustaining such a high energy level may ultimately lead
to decline in effective performance.
Early Warning Signals
Problem:
A considerable time lag may occur between the first "weak
signals" and the ultimate decline in measurable business
performance. Usually, the negative characteristics become
more deeply entrenched as time passes; the correction of deeply
entrenched problems is often painful and disruptive.
Solution:
Organizations should systematically monitor weak signal
factors, then "amplify" them through institutionalized
analysis so as to be prepared to launch appropriate, timely
responses. Nine characteristics in particular can give useful
early warnings:
1. Excess Personnel: A swollen staff and an
excess of managerial levels can magnify the problems described
above. Effective communication is virtually impossible when
information flows through too many levels. Compensation systems
and title structures may further encourage expanding the hierarchy.
Small "kingdoms" develop; each has its own agenda,
and the stage is set for turf battles.
2. Tolerance of Incompetence: Many large corporations
have difficulty coping with managerial incompetence. The uncoupling
of managerial personnel from immediate, basic business goals
can create an environment where the inability to perform is
masked. Leaders of the organization typically find it unrewarding
to address competence problems as they pass through various
corporate assignments.
3. Cumbersome Administrative Procedures
4. Disproportionate Staff Power: As a hierarchical
orientation develops various staff groups (legal, finance,
public affairs) increase their influence to the point where
the operating groups lose their client status.
5. Replacement of Substance With Form: Many
strategic planning processes produce, for example, thick binders
full of numbers that do not improve management's understanding
of environmental trends.
6. Scarcity of Clear Goals and Decision Benchmarks:
When the business moves into success and maturity phases,
large segments lose their day-to-day focus on the basic business.
Managers often spend more time sorting out the criteria for
the decision than making the decision itself.
7. Fear of Embarrassment and Conflict: One
of the most interesting outcomes we have noted is that when
a company goes through its success phase it becomes increasingly
concerned with avoiding public embarrassment and with side-stepping
conflict. When one company's losses became staggering, no
one identified any problems. While the managers involved were
not untruthful, they failed to report their concerns about
the timing of a new product that was the cause of the loss.
8. Loss of Effective Communication: Business
success requires that accurate information flow vertically
and horizontally throughout an organization.
9. Outdated Organizational Structure: An organizational
structure often reflects a corporation's past rather than
its present or future. To overcome difficulties imposed by
rigid structures, many companies have created task forces,
planning teams, and so on. The organizational climate must
encourage a manager to develop a more broad sense of responsibility
than his or her formal job entails. This broad vision often
seems unworkable. Managers prefer to be cubby-holed, not to
consider the broader issues.
Clearly, it will be difficult to measure many of these danger
signals. Where number measurements are not possible, an anonymous
organizational survey can produce valuable insights.
Intervention Alternatives
The following 4-step thinking model can help:
1. Unfreezing: Establishing the Likelihood of Decline
Senior management must recognize the high probability of decline.
The members of the organization should be challenged to identify
indications of performance decline as they arise. Different
businesses within an enterprise may develop unique problems,
so area leaders must be attuned to specific relevant signals.
2. Reconcile Degeneration Signals with Strategy
Examine the extent to which organizational danger signals
might affect the implementation of strategic business plans.
Doing this will clarify the consequences of taking no ameliorative
action. Each strategic implementation program should be reviewed
regularly, with the goal of identifying potential "derailing"
factors that could threaten programs within the firm.
3. Top-Down Bottom-Up Dialogue
A two-way conversation at this stage might realistically help
- Unilateral top-down dictates will not work, Bottom-up demands
are similarly ineffective. Often more effective communication,
including descriptions of problems and recommendations for
improvements, can threaten an individual's power base. If
particular managers are impediments to change, they should
be removed. The dilemma, however, is that top management itself
can be the problem. In these extremely difficult circumstances,
we still emphasize the point that bottom-up pressure is the
only way to effect change. For an established business, discussion
typically shifts toward improving competitive performance
based on cost containment, delivery promptness, securing quality
levels, and so forth. Line management thus gets access to
the top to discuss these issues. A more issue-oriented, competence-driven
interaction seems to result.
4. Follow-Up Monitoring
The early warning indicators should be continually reviewed,
and the effort to shelter strategy implementation from degenerative
forces must continue. Otherwise, the process becomes a one-shot
attempt to attract attention from key management levels. Ideally,
if the early indicators are monitored closely and the organization
is operating well overall, the changes resulting from intervention
will be gradual - the organization should be capable of revolutionary
changes, however, should the conditions warrant.
Safeguarding Against Decline
If management merely settles for a "mechanical"
interpretation of these steps, not much progress will be made.
It is not enough merely to be aware of - and address - the
symptoms of organizational decline. It is also necessary to
introduce and reinforce institutional beliefs about how to
counteract organizational decline.
- Organize the company into definable ventures that have
explicit goals
- For each business, single out and concentrate on the
toughest competitors and the most difficult customers
- Define each job so that it is closely tied to a venture
and has a "daily effect" on the success or failure
of the venture
- Promote individual diversity in order to challenge the
hardening of outdated organizational concepts. Make room
for experimentation
- Strengthen the participative, interactive, and iterative
sides of strategic management processes.
Conclusions:
Organizational performance almost always slacks off following
a period of economic success. Organizational complacency sets
in if it is not zealously avoided. While it is difficult for
the top management team to recognize gradual performance decline,
several steps can be taken to increase the capability of coping
with degeneration. These include instituting a set of measures
to assess common early warning signals. They also include
building into the strategic planning a set of formal considerations
regarding potential problems. Finally, appropriate managerial
benefits can provide a context for fighting organizational
degeneration. Maintaining a desirable management climate requires
a high and continuous energy input. |
