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Face The Challenge - Sample Section, Chapter 22

Chapter Twenty-Two - Troubled Waters

"Troubled Waters" probes solving problems and business shortcomings that commonly interfere with effective leadership at organizations that are neck deep in operating problems or that are looming precariously close to hidden managerial reefs that threaten to sink their immediate or long-term future. Also addressed are the directional changes that are necessary to overcome the common unproductive business practices, leadership failings, and operating problems that interfere with effective leadership.


 

22.1 A Business That Isn't Growing, is Dying.  The year that a tree stops growing is the year that the tree dies.  If businesses were of the same fundamental nature, the somewhat elusive narrow band of successful leadership behaviors would be much more universally well-known and acknowledged; and the near infinite band of unsuccessful leadership behaviors would be vastly reduced through the survival of the fittest selection process.  Or if stagnant businesses quickly folded within a year or two, the fundamental elements that keep a business vibrant would rarely be overlooked or fall victim to inattention, complacency, or bureaucratic intransigence.  And as Cyril N. Parkinson correctly suggests, it is often after an organization's most prolific achievements that a majestic edifice to its accomplishments is constructed and at which point its market dominance or growth curve potential has already begun to wane.  For only after it has achieved a certain level of affluence does an organization possess the supervisory or financial wherewithal so that its Leaders can engage in such nonessential activities or remove themselves from the operational grind.  But just as few individuals want to have less money in the bank at the end of the year than they had at the beginning, businesses are not formed or operated to purposefully devalue their asset base.  Unfortunately however, this is too often the result when a Leader's strategic vision begins to blur or he or she becomes complacent toward growth; with the organization's size or market dominance doing little to mitigate this onerous outcome other than prolonging the inevitable agony.  As "growth and progress are related, for there is no resting place for an enterprise in a competitive economy" (Alfred P. Sloan Jr., American Industrialist, Chairman & President of General Motors, 1875-1966, YGM pxxii) or for a Leader with large mortgage payments.

 

(A) Continued Vibrancy.  Every organization must keep pace with its competitors and the unceasing evolutionary changes that take place in the industrial, scientific, social, and political arenas where its long-term viability is ultimately decided.  For adherence to outmoded marketing strategies or antiquated production methods sets the stage for obsolescence, and all but guarantees that this "most insidious form" of decay will destroy the organization from within.  While the "if-it-ain't-broke-don't-fix-it" mind-set commonly found in the middle management ranks of large corporations repeatedly stifles Subordinate initiative and helps to perpetuate outdated corporate practices and procedures.  Conversely, to remain vibrant, evolutionary change is generally preferred to revolutionary change, but a failure to continually "evolve" preordains that some form of revolutionary change will be forthcoming, just as disarming to achieve peace has historically led to the next war.  A Leader's receptivity to new ideas and his or her unremitting quest for making improvements also creates a healthier, more dynamic work environment that is capable of surmounting organizational inertia and further forestalls ossification.  For "…with respect to some [many?] things, the future announces itself from afar.  But most people are not listening.  The noisy clatter of the present drowns out the tentative sound of things to come.  The sound of the new does not fit old perceptual patterns and goes unnoticed by most people" (Gardner, OL p131).  Consequently, significant changes can often catch both individuals and organizations off-guard and knock their operational wind out.

 

(B) Growth is essential.  An organization that is not gaining new customers or increasing its unit sales (keeping ahead of inflation) has in essence already entered into some stage of market decline or begun to slid into a state of internal decrepitude (basically Ray Kroc's idea that: "when you're green, your [sic] growing. When you're ripe, you rot").  For organizations experiencing static sales or customer growth can ill-afford to recruit the steady stream of creative, eager-beaver types needed to fill its junior management ranks and who are so crucial to ensuring a profitable tomorrow.  Since without growth, internal promotions become unacceptably slow, and those middle managers who do remain are not ordinarily of the same bud quality from which galvanic senior managers or future presidential dynamos typically blossom.  A torpid corporate environment also fails to provide its junior and middle echelon supervisors with opportunities to develop their skills or to be rewarded for superlative achievements simply because it lacks the invigorating succession of challenging assignments that a more vibrant, growing organization regularly generates.  In addition, the financial and personal fulfillment needs of talented individuals usually grow at a much faster rate, and well beyond the rational economic basis or ability of most entry-level or intermediate career positions to keep pace with such needs through the painfully slow (and often miserly) periodic compensation increases that are commonly associated with static organizations.  Consequently, low-growth or flat-line companies that are unable to provide the challenging career opportunities that are fundamental to retaining such individuals, further exacerbate their own stagnation by failing to stem this predictable talent exodus.  (Jay).

 

(C) Diseconomies of Scale.  The thickness of the policy manual normally parallels the organization's growth until it reaches three supervisory echelons, at which point such literary masterpieces typically begin to expand exponentially as departmental functions are added to an ever more corpulent organization structure.  And the further unit supervisors are geographically from the hub of the action, the more shelf space and three-ring binders that are typically dedicated to preserving its operating procedures, directives, and supervisory memos.  For as most organizations grow in size, the predictably distorted perspective that usually prevails at the universal headquarters is that local problems can best be resolved globally.  If centralized programs initially prove to be successful, then additional personnel and procedures are quickly added to maximize this apparent potential; resulting in home office overhead growth that is frequently disproportionate to the size of the organization's field operations.  This misdirected supervisory cycle typically progresses until local initiatives are all but neutralized as nearly everyone begins to depend on the central office to solve their problems for them; an often cumbersome, time-consuming, and inordinately expensive logistical nightmare.  Thus despite the general wisdom of the growth imperative, bigger does not necessarily mean better, more efficient, or more profitable.  But to prosper, an organization must continue to expand, another seemingly intractable "Catch-22" situation.  During periods of rapid expansion, huge profits, or large capital infusions; efficiency considerations are often sidelined as money is simply thrown against the kaleidoscopic array of tasks that are deemed vital to sustaining the high growth rate or lavish corporate life style.  And as long as sales increases can offset these increased costs, such freewheeling fiscal lunacy continues to endure.  But once the party is over (e.g., venture capital runs out, markets fail to materialize, sales go flat, or products become outmoded) the organization's cash flow can swiftly evaporate; and thus the common imperative for downsizing.  Or if the company is not a cost-efficient producer, its very survival may become questionable once it is faced with stagnant market growth or a life-or-death battle for market share.  In addition, the imprudent expansion into industries or market segments in which the corporation has little or no experience through acquisitions or mergers is often fraught with unforeseen pitfalls; and often produces a larger whole that is economically less viable than the sum of its former parts and a greatly depreciated treasure chest (share value).  Even the merger of two companies in the same industry can fail to maintain their former equity value or combined market share as a result of poor integration of its resources or a lack of product or operational synergy.  As efficiency is not achieved by sheer size alone, it is achieved by ensuring that each Subordinate, expenditure, location, supervisory unit, department, product line, division, etc., pulls its own weight on an ongoing; hourly, daily, weekly, monthly, or annual basis; for there is no credible accounting entry that can transpose a run-of-the-mill operating performance outcome into a brilliant earnings statement.

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Copyright 2006 by H. Garrett Hayward from Face the Challenge: The Leader's Success Handbook