Monday, June 24, 2013
IT’S TIME TO RE-ORG
It seems as though multi-national companies are perpetually involved in re-orgs. When one re-org is completed planning begins for the next. If only planning went into topline growth, preparing for the future, better serving the customer or creating BIG ideas perhaps businesses would grow healthier as opposed to being thrown into this vicious cycle of re-orgs.
Re-org is another way of saying re-organization. Nowadays it is really a euphemism for “cutting” personnel (i.e., eliminating positions) and divvying-up the spoils. But these spoils are not really treasures. Oh, those that are spared the butcher’s block are relieved to keep their jobs. They may even get new titles (but not necessarily more pay), take on more responsibilities (but not necessarily more pay) and be required to do many more things (but not necessarily for more pay). Hmmm, makes one wonder who has really been spared? And, who is receiving the short end of the stick, those that have been cut or those that remain? (Yes, we are thankful to hold onto our jobs, until the next one comes our way!)
Just recently one of our client companies went through a re-org, another one of many it has undertaken. They’re so incredibly disruptive. Not to the competition but to themselves. Perhaps, this will be the last one. We don’t really see how they can possibly cut more personnel. And, rumor has it that another client company will be announcing a new wave of cuts. These cutbacks, at this company, have been going on for years. What does it take to get it right? Paying more millions to the same consulting firms that planned the previous re-org? We doubt it.
There’s a lot of talk from CEOs about the reasons behind these re-orgs. But, it all feels like “political” speak to us. The real reason has to do with delivering the bottom line. Public companies make promises to Wall Street regarding profit growth. If those promises aren’t kept then investors punish these companies on the stock exchange. If their stock prices plunge then so too may the bonuses of the senior executives running those same companies. They may even lose their jobs. Ah, there’s the crux of the issue. Now, these same executives have made promises about topline growth also. But it appears that bottom line growth (or preservation) is more important than topline growth.
Sometimes it is important to make personnel cuts. Companies grow bloated with personnel. Silos are built and/or fortified. The organization grows lethargic. Or, worse yet, may become too large to manage effectively. Moreover, the future economic environment may require that the organization adapt to changing marketplace dynamics and fortunes. Yes, there are certainly times and situations when cut backs in personnel make sense. Economists often credit U.S. companies with the ability to better manage through turbulent times (versus those in countries where it is more difficult to cut employment) based on their ability to more readily and quickly make personnel cuts to maintain profit growth or preserve profits.
Consequences of Re-Orgs
But re-orgs are not all about positive outcomes. They are fraught with negative consequences. One of the most significant is that prior to, during, and immediately following, managers are paralyzed. Understandably, nearly everyone is worried about his or her job. So people’s minds are not on their work. Additionally, they may be told to “stand down” (i.e., hold back from spending previously approved funding for marketing support) since the personnel cuts are often accompanied by spending cuts. At the least, there is a pervading fear that to take action might be greeted with personal consequences (as in being one who is cut, or rebuked, or fail to gain promotion, etc.). So, the work that is actually accomplished is the “non-critical but urgent tasks” that do not drive incremental topline growth.
Which brings-up a second point regarding the “critical but non-urgent strategic thinking.” Longer range planning (i.e., preparing for the future) tends to fall by the wayside. This is particularly the case where the re-org is touted to support new strategic direction and workers are unclear of the direction. This is further exacerbated where strategic direction changes frequently. What does this mean? Well, when the future becomes the present the organization is unprepared to be competitive. They hadn’t planned for it. Or, they hadn’t quite caught up to the future yet. As a result it is unable to (sufficiently) grow the topline and the solution is … you got it! Yes, another re-org (or round of cuts) to make the bottom line.
Typically, the new organization emerging from the re-org does not function more effectively than the previous organization. It may actually function less effectively. The (fewer) personnel that remain often face the burden of additional work, to fulfill the work of those who have been cut. As a result there is even less time available to address and resolve those critical, non-urgent tasks. Also, people frequently complain of burn out and loss of purpose. Additionally they may begin to resent their bosses and the organization. And, if they don’t give a damn the organization will not be operating at its competitive best. Consider teams that throw in the towel when it is clear that there is no hope for winning. Now you can appreciate the impact this has on an organization.
Also, it takes time for those that remain to take to their new roles, reporting and working relationships. It takes time for everyone to figure out what is going on, what is expected of him/her, who does what and with whom, and what it takes to get things done. All the while no one who has masterminded the re-org has a clue regarding opportunity loses that mount while people settle into the new organization. These opportunity loses may not be visible and, as such, quantified, but they are certainly felt as the organization struggles to regain its footing and position in the marketplace. And, all the while, the future is rapidly becoming the present with a whole new set of challenges for which the organization with its cuts (in forced austerity) is ill prepared to handle.
By the way, competitors may (or, as we believe, should) strike when a company is undergoing a re-org. This is the time for competitors to invest in converting customers to their companies, who were previously served by the company undergoing re-org. This is where the real spoils are to be found. And, if you serve those customers well then you’ll stimulate topline growth at the expense of the company immersed in, and pre-occupied with, re-organization. It’s also an opportunistic time to hire away top performers from the company that is undergoing a re-org. Cutting tends to be indiscriminate in practice. The best performers are “displaced” along with marginal performers as “departments” and “positions” are eliminated (as opposed to people). Also, those performers that remain may become disenchanted by the lack of resources to grow the business and to advance in the organization. They, too, may be open to joining companies that promise opportunities commensurate with their skills.
Corporate culture is yet another issue. What is the culture that continues to eat its young? What is the culture that cuts marketing support programs and skimps on wooing and serving customers? What do we call this kind of culture that remains?
Yes, customer loss through defection (i.e., switching to competitive brands) is a real consideration with re-orgs. As previously mentioned, in many cases the re-org is accompanied by (broad and deep) spending cuts for support programs. Furthermore, investments in R&D and infrastructure are delayed, even terminated, undermining the organization’s ability to remain competitive in the future. Products may be rationalized too. In the end, the re-org affects the customer base. The customer is not served very well or served less well than prior to the re-org. As a consequence the organization may experience loss of precious market share, which was and is so very costly to win.
The Second Act
The re-org is expected by stock analysts to be the first act of a two-act play. The second act is about topline growth. The very act of re-organizing sends a positive signal to Wall Street. It suggests that the CEO has control of the situation and is getting the “house in order.” (Another reason behind re-orgs is to instill confidence with shareholders, and the Board of Directors, so the CEO can keep his/her job.) It suggests that once costs are under control and profits are preserved that the company will restore topline growth in the (near) future. That’s the anticipation of the second act. But unless there is renewed growth in the market itself, or a new company development of substance (i.e., blockbuster new product, more effective operating practices, a really BIG idea, etc.), well then, we are back to more and deeper cuts, or euphemistically speaking another re-org, to satisfy investors’ insatiable hunger for more profits.
So, look, we’re not organization experts. So what do we know? We are merely sharing our observations of being in business some 40-years and our experiences working with some of the most recognized multi-national companies in the world. However, we believe we know the objectives we’d seek from a re-org. We would seek an “authentic” re-org. We define “authentic” re-org as “one that improves the organization’s ability to function more effectively to secure a competitive advantage in creating brand loyalty now and in the future.” Cost cutting is a valid objective for a re-org but it is not the only one, nor should it be the primary one (unless the organization’s survival is at risk). The people whose jobs and positions have been eliminated in a re-org are typically not the people that put the company at risk in the first place. It is the same, or same thinking, leadership that has and will continue to fail with their strategies, choices and practices to make the company more competitive, and restore health. The objectives we’d seek have to do with improving the function of the organization - as in getting the most out of its people, making the organization more competitive, creating Big ideas, being structured to appropriately manage into the future, etc. An authentic re-org is one that is done with you, not to you.
CEOs need to give consideration to improving functionality. It is about achieving Act II. The organization needs to be built around the work that needs to be done to be competitive in profitably growing the topline by better satisfying current and prospective customers and, ultimately, in creating brand loyalty. Importantly, this is not about what the CEO does this year but where her/his sight is regarding the company over the next 10-years. Today’s CEO needs to see 10-years into the future given the rapid changes in markets, technologies, etc. Wayne Gretsky, the hockey legend, stated that he didn’t skate to where the puck was but where it was going to be. The CEO needs to restructure the organization not for where the market is today but where it will be 10-years from now. In other words, the organization should prepare to take the company into the future. It takes a courageous visionary to identify the future and prepare the company to get there before its competitors.
But improving functionality is not solely the responsibility of the CEO. It’s everyone’s responsibility. Let’s start with department heads, such as the CMO (Chief Marketing Officer), V.P. of Marketing, or whatever the title. Each one needs to exert leadership thinking in restructuring the department so as to be more effective, and avoid personnel burn out. They need to establish SOP (Standard Operating Principles such as being customer centric), identify key functions (i.e., the tasks that support the development of a learning enterprise such as MBO, Marketing By Objectives, planning) and determine resource allocation so as to align the department and work streams to empower marketers to create brand loyalty and profitable topline growth.
Unfortunately, however, we believe it is the rare CEO or CMO who is going to make a difference in successfully leading an organization through Act II. It is certainly not the same CEOs who are managing their companies through a perpetual state of re-orgs. And it is a rare CMO or VP of marketing who knows how to instill the appropriate disciplines that establish a “learning enterprise,” an organization that is able to predictably create its own future. (It is most certainly not those marketing VPs who, for example, do not insist on a standardized MBO plan.) So, where does that leave you, as a survivor of another re-org?
- Your role is to be a “thought leader’ in leading your brand through these difficult times, while continuing to create brand loyalty.
- Your role is to identify and address those critical, non-urgent tasks that will contribute to a bright future. These include development of: a competitive, enduring brand positioning strategy; a strategically appropriate, single minded Essential Creative Brief; a Marketing By Objectives plan; a pipeline of product improvements; leadership communications; the discovery of “legitimate” and “productive” customer insights; etc.
- Your role is to make a learning enterprise of your brand. This is to enable you to more predictably create and achieve your brand’s future growth.
- Your role is to make choices. You can neither serve all customers nor do everything. You not only have to make choices but you must make the correct choices. The late Steve Jobs would ask his top 100 managers to identify their priorities for the company. He would then have them collaborate to whittle these down to ten. Then he would cross out seven to identify the top three priorities for the company. What are the three things that you will get done for your brand this year that will drive incremental growth and improve the brand’s health?
- Your role is to strive for BIG ideas. Doing the same things in the same way is not going to change your brand’s growth trajectory. You need BIG ideas that will drive customer behaviors.
- Your role is to execute with excellence. It starts with identifying expectations for everything you execute. Then not settling for anything that will not realize those expectations. Finally, inspect (i.e., analyze) the results against your expectations to keep your marketing real.
- Yes, unfortunately your role is to ensure that the housekeeping is maintained regarding those things that must get done (e.g., getting sales materials out in time for a scheduled promotion).
You will most likely be confronted with (more than) one re-org during your career in marketing. But a re-org does not have to take you down. It may provide you with a genuine opportunity for personal development and growth (within the re-org company or another one).
We sincerely feel for all of you caught-up in a re-org, particularly those of you whose jobs have been eliminated or are currently displaced and are in the process of seeking employment. If we can be of any service to you, please don’t hesitate to let us know. This offer is also extended to those of you that have been spared. We recognize you have your work (a lot of it) cut out for you in making your marketing matter.
Richard Czerniawski and Mike Maloney
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