What I consider lunacy in the corporate world, is living and working without reason, or continuous change or action without obvious purpose. I need to be careful here because one man’s lunacy is another man’s eccentricity. Let’s start by reviewing the definition of lunacy or insanity that we’ve likely all learned – doing the same thing and expecting different results. With about a third of executives being changed out every year, we have reorganized our companies to death. Most have developed a pattern that gets repeated with each successive wave of new leaders – on average, at least every couple years or so. Let me paint the picture of what I call Company LLC, not limited liability company but rather the Leadership Lunacy Cycle. You can begin anywhere in this cycle and follow it in any direction. It goes like this:
One management team (and by the way, a variation of this can occur at various levels, so it is not pertinent to just senior leaders) decides to organize the company around product lines. Since this causes such obvious efficiencies, we can lay-off some people. We form cross-functional product teams consisting of specialists in selling, marketing, engineering, industries, operations and support. By having such teams, we can foster healthy internal competition among product lines. We use the savings from the lay-offs to hire more development engineers. A time comes when results are not moving forward as expected by the shareholders.
The next management team comes in and makes “significant improvements” by restructuring around industries. Because of the inherent advantages of such an organization, we can lay off some people. We realign all the resources around SIC codes, and ensure that the sales people achieve differentiation from their competitors by becoming specialists in their respective industries. We use some of the savings from the lay-offs to hire gurus who are renowned for their presence in the global industry community, and we market industry-specific solutions around the world, setting up centers of specialization. Soon, we discover that most industries are cyclical and therefore we find we are continually shifting investments around. We invest the most in the industries where we are getting the most recent big deals. That must be our sweet spot and we become known as the leaders in three specific industries. However, we soon become reliant on those three industries, and find we are missing opportunities. New visionary management is needed to fix this.
So the latest new management team decides that neither product nor industry focus is the right answer and that we must organize around geographies, providing solutions packaged and customized to local needs. We must think globally and act locally. Since this type of structure allows regional differentiation, there must be reduced costs inherent in this and so we are able to selectively reduce manpower to invest in the most profitable regions of the world. In order to understand the needs of the different geographies, senior leaders are encouraged to accept expat assignments in order to gain insight into the global needs of the enterprise.
We soon recognize that this structure does not serve our largest and global clients uniformly. New leadership is recruited.
The new management team states the new obvious paradigm – since large global clients offer the best possibilities for growth, we must have an account strategy lead by experienced senior business consultants, who innately understand big business. While these people cost more, there is money to be saved by reducing the total overhead and focusing fewer but better resources on the select accounts. Layoffs are a natural result of the new strategy, and will help pay for the increased cost of top talent. Since a single account executive will marshal whatever resources are required to leverage business from the selected global clients, collaboration is the new corporate buzzword. We bring all our product, industry and geographical expertise to bear on major initiatives with significant strategic accounts. As soon as it is realized that we become dependent on the “big deal” and our base business has evaporated, the lunacy cycle must be advanced and renewed. With recent technological advances and real time performance information available, the latest management team emphatically states the need to return to our roots of superior solutions, and to invest in the products that will launch a new future. The cycle continues.
What I have experienced is that any structure can be made to work as long as strong, visionary, and committed leadership is at the helm. A study of business reveals that there are companies who have continued to lead their markets with a product focus (SWA), an industry focus (Halliburton), or a geography focus (Cap Gemini). The success criteria that remains common is strong focused and committed leadership.