Category Archives: Reorganization

An Acquired Taste

Chances are that if you work long enough for companies in the public domain you are going to get to participate in either the acquiring of another company, or the being acquired by another company. Acquisitions and divestitures are a fact of life in the business world today. Companies continue to grow and change and acquisition and divestiture are one of the fastest ways to rapidly remake an organization. Having already been through a few of these types of management and organizational changes in past lives, it is very clear that both the change itself, and the time anticipating and leading up to the change can be a challenge to your leadership capabilities, not to mention your sanity to try and get through.

There are all sorts of trite adages and sayings regarding change that can be inserted here. I’ll leave to everyone to insert the one that they are most comfortable with. The bottom line here is that when there is an acquisition, you truly have a change.

No matter how much due diligence the acquiring company has done, they cannot be aware of all the capabilities and the people that make up the organization that they are acquiring. And no matter how much communication the acquired organization provides its staff, and no matter how much research has been done on the acquiring organization, no one can be fully prepared for the new management philosophy and new management structure that will be imposed after the acquisition.

Divestitures and acquisitions are interesting phenomena in that there are a disproportionately large number of people being affected by the change, with only a disproportionately very few who actually have any sort of input to or affect on the change itself. So, everybody ends up worrying about the coming change, but there are very few, if any who actually can do anything about it. The fact that they can’t do anything about the change doesn’t stop people from focusing on it almost to the point of total distraction.

Reinhold Niebuhr seems to be the source of the quote that everyone uses in times like these. Oddly enough it is known as the “Serenity Prayer” and it goes:

God, grant me the serenity to accept the things I cannot change,
The courage to change the things I can,
And the wisdom to know the difference.

I actually like this starting point, so I’m going to look at it in application to a business acquisition or divestiture.

Unless your organizational title begins with the word “Chief” and ends with word “Officer” chances are that you are probably not going to be consulted about any corporate acquisition or divestiture. It may be hard to believe but it seems that there are any number of individuals within an organization that feel this is truly some sort of mistake or oversight.

It’s not.

Unless an individual has the wherewithal to rapidly assemble another, competing acquisition or divestiture bid from another corporate entity or capital fund, this is the way it is going to stay. They are not going to ask for everyone’s, or possibly anyone’s opinion. The acquisition or divestiture is not going to be changed. This is where that “Serenity” portion of the prayer comes into play.

As difficult as it sounds, leaders cannot afford to spend time (read: waste time) worrying about the outcome of the acquisition. They need to remain focused on the achievement of their and the teams goals. At this point the team’s responsibility isn’t changing. Further the leader needs to keep the team as a whole, as well as the specific individuals within the team focused on their objectives as well. It is not an entirely easy thing to do.

This is where the “Courage” portion of the prayer comes into play.

As part of any acquisition or divestiture, decisions regarding who will be a leader in the resulting new organization and who will not, are going to be made. It is somewhat frustrating to all involved in that again a relative very few will be making decisions for the relative very many on these topics. As uncomfortable as that may sound, that is the way it is going to be. However, all is not left entirely to chance.

One of the key aspects that will be weighed and taken into account with these leadership decisions is going to be performance. It probably won’t be the only aspect reviewed, but it will be a key one.

Individual and team performance are items that can be changed. Leaders must have the courage to change their own and their team’s performance. They can probably change it for the worse by worrying about the acquisition or divestiture, or they can change it for the better by maintaining the focus on the business goals at hand. While it may be impossible to ignore the pending business change, it is probably best to acknowledge as an event that cannot be changed and move on to the topics and goals that can be changed.

There is a great disclaimer in just about every financial investment prospectus document that I have ever read. It goes (and there are several variations of it available):

“Past performance does not necessarily predict future results”

We have probably all seen it. It is a US Government Securities and Exchange Commission (SEC) mandate that it be included in every investment prospectus.

So what do we do? We go and look at the investments that have done the best over some period of time, and select those to invest in anyway.

If they have done well in the past, we expect them to continue to do well in the future. What else do we have to go on? Are we really going to select those investments that have underperformed in the past in the expectation that they have obviously learned from those mistakes and they will henceforth only do better in the future?

I don’t think so.

My point here is that when the business organizational change is done and the decisions regarding positions and leaders are being made, one of the very few items that a leader can affect is their performance. And despite what the “disclaimer” may say, I think it is probably safe to position that past performance in business and leadership roles is a good predictor of future results.

It may not be the only input taken into account, but it is one of the very few that an individual can change.

That doesn’t seem to stop people from worrying about the outcomes of any acquisition or divestiture based changes though. I guess this is only natural. When there is uncertainty, people will have a tendency to focus on those uncertain aspects. This is also where that “wisdom” portion of the prayer comes into play for a leader.

A leader cannot deny or ignore the uncertainty that their team members or peers for that matter will feel with the pending organizational changes. To do so would only exacerbate the issue and create different forums for these concerns to be aired. That will not be a constructive situation for anyone involved.

As I noted above, team and individual concerns regarding the organizational and structural changes need to be acknowledged. They are real. There may not be much that anyone can do about them, but they do need to be acknowledged. Once the concerns are identified, the leader needs to walk the team through the known information and structure and restate what is currently unknown.

By identifying the unknown aspects of the pending changes, they are in essence then contained, and a brief discussion as to what the team and its individual members can do about them will be in order. The key here is the public acknowledgement of the concern and the discussion about what can be done to correct the situation.

This in turn will drive the team and individual acknowledgement that there probably isn’t much that they can do to address these topics. Neither the information nor the ability to modify these concerns resides in the organization. The team focus can then be shifted back to those topics and concerns that the team can affect and address which primarily are their objectives and performance against those objectives.

Acquisitions and divestitures of organizations are the business equivalent of tectonic shifts. They are truly events that are only dealt with and responded to as there are very few things that organizations can do to plan for and work on to address them. By their very nature, these sorts of changes and agreements are kept from the public eyes for all sorts of legal and competitive reasons. It is always this type of required secrecy that generates concern and disruption in all the organizations involved.

The fear of the unknown and the uncertainty that it generates regarding the future can be debilitating to an organization going through an acquisition or divestiture. In times when this has occurred it is the leader’s responsibility to have the wisdom to keep the team focused on the aspects of the business that the team can change, as well as the courage to acknowledge and address the concerns associated with items that cannot be changed.

I am not so sure that anyone gets to have any serenity in times of pending organizational change, but demonstrating wisdom and courage will probably get the team through.

Make Your Customer’s Business Simple

Sometimes it is hard to think of business as simple. Perhaps as we have evolved from a production oriented society to more of a consumer and service oriented society we have evolved the notion that business is complex. Maybe it is because of our dependency on the tools and technology now required to conduct business has evolved as has the perceived complexity of the infrastructures that we must have to support them. Think about the power that we now have on our desk tops and in the palms of our hands. Despite all of this, I think that business is only complex if we decide to allow it to be complex, or worse yet, make it complex of our own accord.

Technology has effectively removed time and distance from the business equation. Anyone, anywhere at any time can access a global marketplace where they can “do business” with just about anyone else that they wish. It has also made everyone smarter, in that the only reason for anyone to make an uninformed purchase decision is because they chose not to get informed by using their aforementioned powerful desk top or hand held tools.

But if business is really not all that different why do companies continue to insist on changing and continue to invest in developing and creating new and better products? Why do companies still have sales teams and operations groups and all the other corporate functions that have been the mainstays of business organizations for hundreds of years? If business is really changing then why are so many things about it still remaining the same? When business’s reorganize, they invariably “shuffle the cards” associated with their organizations, but they are still the same cards.

I think it may be in that in its simplest form business is about delivering value. The value can be in the form of a product that can be as simple as a clay pot or as technically complex as a cloud based data storage system, or in the form of a service such as simple as a freshly mowed yard or the complex capability to operate and maintain that cloud based data storage system. The quantification of the value provided is determined by the amount of currency that will be exchanged for the clay pot, mowed yard or cloud based storage system.

There you have it. This is still pretty simple. Business is about exchanging money for something of value. I guess that is actually the definition of commerce, but in this case it is also business.

com•merce/ˈkämərs/ The activity of buying and selling, especially on a large scale.

It seems that it is from this point that we have decided to add complexity to the business formula.

Since business cannot fundamentally change the simplicity of exchanging money for something of value, it tends to change how it goes about pursuing this exchange. It organizes itself to simplify the pursuit. Then it reorganizes. It changes in response to a perceived competitive threat. It centralizes. It decentralizes, distributes and diversifies.

In short organizations drift into an internally focused approach to commerce and business. Since it is so difficult to change a customer, organizations tend to focus on changing themselves. It seems as though that there is a belief that if an organization can convince itself that it is changing in order to make itself easier to do business with, an organization can become that much better at doing business. This is an almost purely internally focused concept. Unfortunately business and commerce must usually be done with the external world.

This is an approach that invariable runs out of momentum. Organizations seem to believe that by endlessly trying to make themselves easier to business with, it makes it easier for the customer to do business. This is a key point. Just because an organization has tried to make itself easier to do business with does not mean that the organization has made it easier for the customer to do business. I guess a good example of this would be making it easier for the horse and buggy driver to buy buggy whips does not necessarily help him sell more buggy rides around Central Park.

It is a debatable trade-off of how much value is associated with the complexity a company can introduce into their systems and processes in an effort to reduce a customer’s complexity in dealing with them. Increased complexity comes at a cost or in this instance a price to the customer. An internally focused business confuses the value of removing customer complexity in dealing with a vendor, with the actual removal of complexity from a customer’s business.

This is a rather circuitous way of saying that the focus should not be on making it easy for a customer to do business with you. That must be a given. The focus should be on how you make it easier for your customer to do business with their customers. That is where the true value of commerce is.

There is a certain amount of value that a customer will recognize in an organization that makes itself easy to do business with. There is far more value that a customer with recognize in an organization that makes it easy for the customer to do their business.

This is where we get back to concept of “simple” in business. How do you make it easier for your customer to do business? How do you help them remove the complexity associated with their customer commerce? How do you reduce their risk? How do you help them increase the perceived value of the good or service that they are offering to their market?

It is no longer good enough to just make it easier for your customer to buy your good or service. Everybody has just about mined out this opportunity with the law of decreasing returns starting to take greater and greater affect versus the input required to affect the change. The better approach now needs to be how do you make it easier for your customer to sell their good or service. What expertise can you contribute to their success? Remember it seems to be the tools and technology that is complex, not the business.

Expertise has been and still is a product. But as I noted earlier, as products that make up our tools, and the infrastructures to support them have evolved and become more complex, it seems that expertise associated with operating these tools and infrastructures continues to be somewhat overlooked.

Organizations continue to try to restructure themselves to make it simpler for their customers to do business with them. They also try to restructure to make themselves more efficient at conducting their business. I think the next logical step in the evolution is to no longer think about how you can restructure yourself to conduct your business, but how you can help your customer restructure themselves to make their business easier to conduct.

I think the question for the future is no longer how can I be easier to business with, but more how can I make you easier for your customers to do business with? What customer complexity can you remove from their organization? It should no longer be what device can you sell them that is more efficient, but what can you do for them to make them more efficient.

In an internally focused, product driven world this sounds complex. It is easy to believe that because it is different than they way organizations have been thinking, but when you think about it, it should be pretty simple.

Drop the Rope

Business, like life is about growing. Pretty deep, huh? Actually it is probably more aptly described as pretty trite and stale. In so many instances we seem to associate business and professional success with acquiring an ever growing reporting structure. The more people you have reporting to you, the greater the size of the pyramidal organizational chart that you sit atop of, the more successful you must be right?

This acquisitive approach to organizational dynamics is probably the leading cause of more lost business productivity that just about any other topic that I can think of. The time that is lost to the business based on the various organizational structuring, restructuring, acquiring and defending from being acquired, plans and discussions has to be boggling in its magnitude. I think it may be the largest driving factor in the zero sum gain practice of business and office politics.

As an example, if you and I are peers, there are essentially two ways that I can advance in the organization with respect to you, and others in the organization, given the ever reduced nature of opportunities as you advance up the organizational structure. I can do something that truly merits my promotion into a next level up vacancy, or I can arrange it so that your team, or even better, you and your team report to me, then either I have been de facto promoted or you have been de facto demoted. Either way I am now relatively more important than you (and presumably others in the organization) based on the new reporting structure and my increased span of control.

Most of the time these sorts of restructurings and reorganizations are couched in terms of “increased efficiency” or “improved corporate alignment” or some other type of corporate speak.

Having been a veteran of these resource wasting political machinations I can honestly say that I have come up with a new approach to dealing with them. It may not actually be a new approach. It is the approach that I choose to use when I find myself in these political and organizational responsibility free for alls and tug of wars. There may be others that have chosen to use this approach, only I haven’t run into one of them yet. I have termed it “Dropping the Rope”.

In many of the business environments that I have previously been in, if you were not openly or aggressively looking to expand you span of control within that organization, you were viewed as an internal organizational target for acquisition to enable the expansion of someone else’s control.

What a “dog eat dog” view of internal organizational politics. Either fortunately or unfortunately, depending on which side of the acquisition process you have been on, with a few exceptions it has tended to be an accurate perception, at least for me.

Dropping the rope, as the name implies simply means that there is usually nothing to be gained in openly opposing these sorts of restructurings. Pulling against a force that you may, but more probably cannot counteract, is a waste of your effort. I have written in the past that ego is good in that it drives us to work harder in order to avoid failure and to achieve our goals. I have also written that there are times where one must check their ego at the door because it causes us to pursue unproductive goals. I believe that these sorts of political turf wars are some of those unproductive times.

That does not mean that you should just roll over every time someone makes a political foray into you area of responsibility. Far from it. It is always good to directly check with your reporting structure to vet out what is in effect business management sanctioned and what is just curiosity. Once you have verified that a political reorganization is going on, the time has already passed for counter arguments. If you have not been involved in the restructuring decisions any resistance to them will be viewed as an unproductive professional tantrum and obstructionism. It is time to drop the rope and get on board.

I have been careful to classify these events as a political reorganization. Reorganizations for the purpose of cost reduction, or to get closer alignment to the customer’s business structures are usually clearly defined as such. They also usually entail some sort of a reduction in staff. If there is a restructuring going on that does not involve a reduction in staff you can usually guess that it is political in nature. And as such it will probably not add value to either the business or its customers.

Therein lays the key. In a time when the business is internally focused on a political reorganization focus even harder on the value that you and your organization brings to the customer. If part of your value proposition is affected in the impending changes, simply identify it and clearly document that it is being transferred to a new responsible party.

Instead of taking time away from the customer based charter, instead of putting together all sorts of irrefutably logical reasons why the decided change should not in fact happen, instead of taking it personally that a responsibility that was once yours is now going elsewhere, focus on the customer and let it go. It is hard to believe but these things do have a way of working out.

I hope this sounds like the now logical but formerly painful, ranting, frustrated voice of experience. I have learned to trust in my abilities. I would suspect that you have as well. My experience in these situations has usually been that when I officially transition the function or responsibility in question, in due time I am contacted and requested to resume responsibility for it. Political expediency has a way of giving way to functional performance. The most recognized and valued performance in business involves customers and their money. A temporary political internal focus in a business will always give way to a need for customer performance.

Dropping the rope in an internal, political organizational tug of war quickly removes you from the distraction. It gets you out of the arena in question. It cleanly severs your ties with the responsibility in question. It enables you to remain professional and keeps you from being viewed as an obstruction to the desired organizational change. It allows you to stay focused on the customer.

Staying focused on the customer is everyone’s job. Periodically organizations do have a tendency to become internally and politically focused. These periods by necessity always pass. When they do it is usually those that have stayed focused on the customer based substance of the business, and not those that have been focused on the internal politics of the organization that tend to profit in the long run.

Why Reorganize?

I have heard a number of reasons why a business needed to reorganize, but in reality I can think of only two reasons that are a business should go through a reorganization. Reorganizations are inevitably messy, become somewhat political in nature and distract the entire organization from its primary goals; providing value to the customers and in return of that, providing value to the business owners. There may be several other different names for the reasons to reorganize, but for me they return to these two basic reasons; you reorganize your business to better match your customers’ business model, or you reorganize to cut costs and try to improve profitability.

Sun Tzu in his book The Art of War stated that war is not to be undertaken lightly as it will cost the state that goes to war its resources, its people and the time and attention that it could place on other more beneficial and constructive projects. The same could very easily be said about reorganizing a business.
Reorganizations cost businesses resources and money in their creation and execution. They cost businesses people, both those that are directly affected by the changes as well as those who decide to leave based on the incremental uncertainty that has been injected into the business. Reorganizations also cost the business the opportunities that are missed both in the market and within the business while the organization’s focus is on the creation of a new internal structure.

Businesses live and die by providing value to their customers. Over time customers and their needs can change. Just as records gave way to CDs, which in turn have given way to MP3s, and “mailing a check” has given way to on-line e-commerce (to use a few consumer products for illustration), businesses have had to adapt to the changes customers have demanded. In the past I have written about business “momentum” as the inertia that has a tendency to keep a business moving in the same direction and doing the same things until a force acts on it to change things. A reorganization would be such a force.

The net result here is that if your customers have changed the way they do business, the types of products they demand, or any other fundamental structures associated with their needs, you will have to modify your business structures to match them in order to be efficient and provide your customers with the maximum value that you can.

The other primary reason to reorganize is to cut costs. Refocusing resources away from outdated or unprofitable markets and products, taking advantage of new streamlining operational techniques, or reacting to fundamental changes in the market or economy are examples of reasons for a cost cutting reorganization.

When a business decides to engage in a cost cutting reorganization, the focus needs to be two-fold. What work is going to be stopped or removed from the organization, and what functions are going to be retained or enhanced? When you are cost cutting you are removing expense – and people – from the organization. Some of the work that those people were doing can and will be absorbed by others within the organization, but a significant portion of it will not. The key will be to clearly define the work and roles that are no longer providing the required value to the business and to focus on them.

In either type of reorganization change will be met with some resistance. Those whose roles may be changing will have some aversion to having to learn new roles. Those whose roles and work are no longer seen as providing the desired value to the company will resist being defined in those terms. The longer this situation exists the more disjointed the organization risks becoming.

The key to the reorganizations success will lay both in the final perception of the changes by reorganized group, and the speed at which the changes were affected. If fundamental changes in both the management structure and just as importantly the number of managers – remember, if cost cutting requires less work it also requires fewer managers to manage the work – have been enacted then the team can and will recognize the value of the reorganization. If the changes are enacted in a very timely manner where the opportunity for the business to be distracted from the primary focus of providing value to the customer is minimized, the reorganization will also be much less disruptive and accordingly far more successful.

Don’t Ask – Do Tell

I think we have all be in organizations that have implemented reorganizations. Some of us have been through it several times. We have seen some good ones and we have seen some not so good ones. In most instances difference between a good reorganization and a bad one depends on the first steps taken by the new leader. Those first few statements and actions by the new leader set the tone for the new organization.

Those leaders that took a little time to meet and understand their new team showed they were taking the time and interest to understand what the team faced. A team will normally respect this approach. Those that took immediate actions showed they had a plan and were going to be decisive. The team will again normally react positively to this approach as well and look for the logic and goal associated with the changes.

Then there are those leaders whose first action is to question their team.

They will ask if the team has the competitive drive, the talent, the training, the spirit, the desire, etc (pick one or more) to accomplish the task or challenge that is in front of them. This is not what a team needs to hear from its new leader. The team does not want to hear the leader questioning their capabilities or mind sets.

A team wants to see those attributes in question, in their leaders. They want to see it in statement, action and deed by the leader. The members of the team don’t want to be questioned about their own commitment or attributes. An organization is a reflection of the leader. A new leader needs to be dynamic in setting both the new structure and clearly annunciating the organizational goals and expectations.

A new leader needs to step in, and up and clearly state what the needs and goals of the new organization are. The leader should not ask the team if they have the requisite attributes. The leader should tell the team they have the attributes needed to achieve the desired goals.

It is a small but very important difference in getting a new organization going.