“96-97% of companies larger than $15 billion fail to grow at the rate of inflation. Big companies die because they use a decreasing proportion of talent of the enterprise to solve increasing complex problems” Joe Kalkman, Best Buy VP Leadership Development and Training.
This was not a statement made during the current economic downturn. It was made when the economy was strong, in June, 2007.Regardless of the current economic conditions, there was a brewing problem that was hidden by a strong economy. That problem is most large organizations forget how to grow on their own merit- via organic sales. They are too dependent on “the economy” to pull them along- or to avoid bankruptcy. Why?
As many organizations get big, they simultaneously lose touch and get lazy. They lose touch- get disengaged- at the executive level with what is happening at the customer level. They get lazy because it is easier for them to have “big meetings” with “big people” than it is to get involved with the day-to-day grunt level work of sales and customer service. That work is delegated to others. Disengagement at the sales and customer service level leads to a slowly dying (growing slower-than-inflation) enterprise.
The amazing thing about death-by-stagnation in organizations- especially large ones- is that the people know they have a problem, but don’t do anything about it. Why is nothing done? Several reasons follow:
- Denial. This is as bad at the executive level as it is at the rank-and-file level. They see the problem coming (not enough new business), but refuse to acknowledge it because they hope it will go away on its own by some miracle (when the economy picks up).
- Complacency. It’s much easier to stay the course instead of changing because change is just too much work. Complacency is a polite term for lazy.
- Selfishness. Some executives want to suck the lifeblood out of an organization and leave the “problem” to the next generation.
- Entitlement. Some folks think that because they are big, they are good, which in turn leads them to some sort of invulnerable (too big to fail) entitlement mentality. They will succeed because they are big- like the steel and automotive giants (which aren’t so giant anymore). Look at what is happening as some large businesses and governments are forced- by economic reality- to re-negotiate their unrealistic pension packages- which were negotiated during a strong economy.
What’s the result? Incompetence inertia and corporate obesity which leads to death-by-stagnation. Incompetence is slowly bred into the DNA of organizations because of reasons one through four above. This leads to corporate obesity. When organizations grow strictly on revenues (add weight), but not profits (muscle), they add on layers and layers of personnel (fat) to “manage” and “administer” the added workload. Then they hit the revenue growth plateau, but are choking on their fattened payroll. Do they exercise and diet? No- they buy a larger size wardrobe to cover it, claiming to go on the diet “next quarter”.
They get away with this as long as the economy is expanding. In fact, since they are still alive and breathing, they cycle back through another round of reasons one through four above- and gain more weight and buy a still larger wardrobe!
How do you get an organization off this death spiral?
- Recognize and admit there is a problem. This overcomes the denial stage. Hoping things get better on their own is not a successful strategy when tough choices have to be made.
- Engage a posse that understands the pain of stasis is greater than the pain of change. No one can do it alone when it comes to overcoming complacency. Some may call this (creating the posse) politicizing an organization. In this case, creating a revolution of change from within is still healthier than letting the forces of external change, like a government take-over or hostile acquisition, crush the stagnant organization.
- Develop a solution- a new course. Look at the big picture and realize there is an entity (the business), a mission (its customer-driven purpose), and resources (employees) to serve, not the other way around. And serving these things includes making necessary, “tough love” decisions.
- Believe, know, and deliver the message. When you know and believe the message, you can deliver it concisely, with conviction, and with an impact that will resonate. They’ll “get it”- and those that don’t “get it”, will depart.
- Lead by example. Nobody will believe what you say unless you hold yourself accountable to the expectations you have for the organization. Lighting up a cigarette while telling someone not to smoke is not a convincing message. Any actions that contradict or don’t reinforce the message deem all messages as not believable.
- Expect resistance. Avoiding change is an incredibly strong force. Change is not going to occur by clicking a remote; taking a pill; or through some quick-fix. It’s always involves suffering short-term pain. It also requires the self-discipline and focus to take action realizing the fix is not instantaneous.
- Leadership is a contact sport. You have to stay in touch with employees on the factory floor and in the field as well as customers and prospects. Be actively engaged in the mission and vision at all levels.
Final note: Never stop challenging the cultural norms- organizations fall back to bad habits when you take your foot off the gas. Silos, complacency, entitlement, ignoring the elephants in the room- all of these things are like viruses that constantly mutate and reappear. There is no cure for them other than to continuously work on good business health practices to keep them from spreading and taking over the entire organization. A continuous commitment to innovative change eventually creates an organizational culture of real growth for the right reasons. It starts with the self-discipline and determination to diet and exercise by keeping in touch with customers, prospects, and the front-line people servicing them.