Sunday, March 22, 2009

Too Much Clarity; a call for Perspective

In February I had the tremendous opportunity to participate in the Concrete World Conference held in Las Vegas, Nevada. This annual conference is the largest of its kind and draws construction professionals from ever facet of the industry. Although attendance was down this year, the forums were packed. The buzz this year was thinning margins, higher competition, and downward economic pressures.

A CFO roundtable discussion was almost completely engulfed with the need to lessen the red on the financials, belt tightening and doing more with less. As a newbie to the industry I just drank in all of the information. Through the discussions, the industry vernacular faded out and the core economics and financials came through. For decades I professed that all businesses are the same; each business’ goal should be to sell something for a price more than they pay for it.

As the debate raged on, I was amazed how increasingly more circular the discussion was becoming. Each constituent sharing their ‘savings’ or their ‘strategic approach’ yet they all continued sharing their pain. Even the most progressive organization, claimed their approach only yielded marginal returns. This comes without surprise, each industry and its organizations settle into a way of doing business that sets them on their industry continuum. They make marginal gains, but there are few who are able to unlock from their position. On March 12, 2009, The Harvard Review Daily Stat reported that cost cutting only has short lived marginal impact; while an in-depth restructuring can yield up to 75% in total savings. In addition, the new structure has greater longevity and has a direct impact on competitive advantage.

With so many organizations feeling the economic pressures of dwindling revenues, the question of survival becomes increasingly more important. Survival in these economic times will not be the result of a series of marginal changes like cost cutting. Survival will be predicated on more Darwinian type changes; core changes in the organizational DNA that redefines the organization. This macro-redefinition relocates the organization on its industry continuum to a very different location.

Chris Zook, Profit from the Core, makes the statement that organizations need to restructure to focus on core competencies. These focuses will ‘turbo-charge’ their growth, as a result. I believe the point Zook is making is to seek out one’s competitive advantage, and restructure to differentiate the organization from others. Then throw the resources at the restructured organization.

It is all well and good to talk restructure, the changing of organizational DNA to move up the continuum. However, there are a few core limitations with the concept. Restructuring requires deep cutting change; but how? Of late, I have noticed that all of the restructurings have been based on financial survival. Restructuring has been focused on getting out of a grave financial situation, and very few have been focused on changing the core DNA of the organization.

The deep cutting organizational restructuring I see that is needed doesn’t come by way of cost cutting, nor having more or better reporting. It is the result of dramatic change. So many of today’s organizations are heavily married to their internal reporting rituals that they get stuck in the minutia of cost cutting and fail to see the bigger picture. The bigger pictures don’t come from the clarity of reporting, but instead by the perspective of the company. In the 1989 Peter Weir film, Dead Poet’s Society, the English teacher, John Keating, has the students stand on their chairs. This simple act was meant to show the students a different perspective of their classroom. Different perspective; I contend that it is immensely difficult for business leaders to orchestrate deep organizational genetic change, simply because of their perspective.

Each day as leaders trudge through their daily duties, it becomes increasingly more difficult to see beyond the organization and the industry. It is difficult to gain a far greater and different perspective. Many years ago, an organization with which I had dealings piloted a project of rotating senior executives through different departments. The idea was to gain ‘perspective’ of the organization from the eyes of a different department. These biannual stints gave executives a greater power in responding to competition and other environmental pressures.

This internal rotation gave department leaders organizational perspective; the result a more agile and balanced organization How can organizations get beyond this? How can they take this model to the next level which will catapult the restructured organization beyond that of its peers? Organizations who desire this radical change must seek out new DNA; DNA from a new species. New ideas don’t come from within an industry, they come from outside. New organizational DNA must come from outside of the industry. This practice is taboo and more so in this economic climate. However, companies who go down this road easily become way ahead of their market peers. These organizations bare their practices to the eyes of a new comer; someone who brings a whole new perspective. Penn Millen, the head of client communications for a prominent US law firm, practices this philosophy to move his firm beyond the capabilities of others. Millen had made a habit of borrowing successful business development ideas from other industries and tailoring them to fit his firm’s needs. (Rachel Zahorsky, The Closer Look, ABA Journal, March 2009)

The time has come for organizations to stop all of the hiring from within; the incestuous gene pool sterilization. Survival will be for those who look to other industries to seek out talent, ideas and practices that will catapult the organization to a new dimension; leveraging on a new gene pool, with new perspective.