Читать книгу Growing Pains - Flamholtz Eric G. - Страница 16

As an introduction to the remainder of this book and to illustrate the personal and organizational transitions that typically occur as a company grows, this section presents a case study of an entrepreneur, Robert Mason and his company, Medco. Although the case selected is that of a medical products company, the issues faced by the entrepreneur and the company cited here are similar to those faced by CEOs in diverse organizations with revenue ranging from $1 million to substantially more than $1 billion. In brief, it has been selected as a prototype of a widespread phenomenon, not one that is limited to certain companies or industries.

Medco's Early History

Bob Mason, the founder of Medco, began his career as a salesman for a major medical products manufacturing and marketing firm. He worked hard to learn all he could about the industry, and discovered that the company for which he was working was not adequately meeting all of its customers' needs, and that there was an untapped market for medical products. So he decided to start his own company, a medical products business.9

Apparently Bob's belief about the demand for his products was accurate, because within a few years, his business began to experience rapid growth. Within five years, the company had reached more than $20 million in annual revenues, and it was estimated that within four more it would achieve $50 million in yearly sales.

The Onset of “Growing Pains”

When Medco reached $20 million in sales, and Bob Mason was feeling good about that, he also became aware that the business was beginning to experience certain organizational problems, which are what we term “growing pains,” as described below:

Many People Were Not Aware of What Others Were Doing . A significant number of people did not understand what their jobs were, what others' jobs were, or what the relationships were between their jobs and the jobs of others. This problem resulted, in part, from a tendency to add personnel without developing formal descriptions of roles and responsibilities. Since employees were added on an ad hoc basis whenever a staff shortage seemed imminent, there was often little time to orient them to the organization's operations or to train them adequately in what their own responsibilities would be. Indeed, there was no formal training program.

Some people were given job descriptions, but did not adhere to their specified roles. Others were given a title, but no explicit responsibilities. Surprisingly, many individuals often did not know to whom they were to report, and managers did not know for which employees and activities they would be held accountable. People learned what they were supposed to do on a daily basis; long-range planning was nonexistent.

Interactions between Departments Was Also a Problem . Managers often did not understand what their responsibilities were and how what they were doing fit in with the firm's overall operations. New departments were created to meet Medco's product and marketing needs, but many managers were not aware of how these departments fit in with the rest of the organization. One manager complained, “People sit outside my door, but I don't even know what they do.” Another new manager described his introduction to Medco as follows: “I was walked to an area and was told: ‘It's your department. Run it.’”

This lack of formal roles and responsibilities made it easy for personnel to avoid responsibility whenever a task was not completed or was completed unsatisfactorily. This also led to duplication of effort between departments. Since no one knew precisely whose responsibility a particular task was, two or more departments or people often would complete a task, only to find that it had already been accomplished by someone else.

People Felt There Were Not Enough Hours in the Day . Most employees felt overloaded. They commonly stayed after hours to complete their work. Department managers, in particular, felt that their workload was too great and that deadlines were unrealistic.

This situation resulted, in part, from the lack of adequately developed day-to-day systems to support Medco employees' work. The accounting, operational planning, and communication systems were adequate for a small company, but quite inadequate for one as large as Medco had become. Systems for purchasing, inventory control, and even distribution were either poorly developed or nonexistent.

People Spent Too Much Time Putting Out Fires . Perhaps the best indication that Medco was beginning to choke on its growth was that employees spent an increasing amount of time dealing with short-term problems resulting from the lack of long-range planning. This was particularly evident in the constant lack of space within the company's headquarters. It appeared to most employees that as soon as the company increased its office space, the space already was filled, and it was time to begin planning for another move. It seemed that there was never enough space or equipment to support the company's staff adequately. When they worked at the firm's headquarters, salespeople usually arrived early to ensure they would be able to find a vacant desk from which to make their calls. Employees who did not go out into the field attempted to handle the cramped space by creating “schedules” for using phones, computers, and even desks.

Employees Began to Feel That Medco Never Planned, It Simply Reacted . A joke around the company was: “At Medco, long-range planning means what I am going to do after lunch.” This was caused partly by the changes in the marketplace and the new demands placed upon the company. It also resulted from the tendency of entrepreneurial companies like Medco to spend most of their time simply staying afloat without keeping an eye on the future.

Employees began to think that, simply because crisis is the norm at the company, that is the way they should operate. They began to call themselves “the fire fighters,” and even took pride in their ability to deal with crises.

There Were Not Enough Good Managers . Most managers at Medco were promoted to their positions in recognition of service. Some were good managers, but most were described by their direct reports as “good technicians who lack people skills.” Further, they were seen as clones: Many employees believed that management had one and only one way of doing things, and that to deviate from the norm would result in adverse consequences.

Plenty of people had the title “manager,” but relatively few really behaved as managers. After promotion, many people simply kept doing the things they had done in their former roles. They were poor delegators, often doing the work themselves rather than assigning it to others. As a result, employees came to believe that their managers did not trust them.

Bob Mason was a strong individual who wanted things done his way, and he wanted to control almost everything. He recognized this, referring to himself as “someone who sticks his nose into everything.” Few decisions were made without Bob's approval or review. As a consequence, one of two things tended to happen concerning managers: (1) the stronger managers tended to butt heads with Bob and ultimately left; and (2) the remaining managers were slowly marginalized. Those managers who decided not to leave Medco tended not to take Bob on, at least directly, and they had little real authority and certainly no power. Inadvertently, Bob had created an organization of “managerial pygmies.” In effect, Bob was a victim of his own need for control. This phenomenon is part of what we have previously termed the “entrepreneur's syndrome.”10

When Business Plans Were Made, There Was Very Little Follow-Up, and Things Did Not Get Done . As is true of many small and growing firms, Medco had traditionally operated on an ad hoc basis. No formal strategic planning system was needed, since Bob had provided all of the organization's direction. Further, the informal structure had allowed Medco's employees the freedom to generate new product and marketing ideas.

As the company grew, however, Bob and his senior management team began to realize that they needed to monitor its operations. Unfortunately, Medco had not developed the systems necessary to have accountability.

There Was a Lack of Understanding About Where the Firm Was Going . Many Medco employees complained that not only did they not know what was expected of them; they could not understand where the company was headed in the long term. This resulted from the inability of Medco's management to communicate its vision for the future to the company's personnel. Employees were aware that changes were being made, but were not always sure how these changes would affect them or their departments. Consequently, employees experienced high levels of anxiety. When this anxiety became too great, many left the firm.

Most People Felt Meetings Were a Waste of Time . Employees complained that too many meetings were held among top managers and not enough among the lower levels of the organization. In addition, those meetings that were held were often inefficient and did not result in resolutions to problems. It was because few meetings had written agendas or minutes – many of those attending described them as “free-for-alls.” They were at best discussions, and at worst fights between departments or individuals. Worst of all, they went on interminably.

Moreover, people complained that most meetings were called on an ad hoc basis. Since these meetings were unscheduled, people typically came to them without any sense of their purpose and certainly with no preparation. Thus, they tended to have the atmosphere of bull sessions in which people shot from the hip. In addition, people felt that they could not plan their work because they were constantly interrupted for “crisis” meetings.

Some People Began to Feel Insecure About Their Places at the Firm . This problem grew out of the many changes taking place and the large number of problems the firm was encountering as it grew. Some original founding members were terminated and replaced. This caused people to wonder who was next. Although many recognized that some employees had not grown as the company grew, they worried about their jobs and their places within the firm. This, in turn, led people to spend an increasing amount of their time covering their vested interests.

The Company Grew in Sales but Not in Profits . Medco, like many entrepreneurial firms, traditionally had been most concerned with increasing sales. It adopted the philosophy of many growing firms: “If we're selling more, we must be making more profits.” Unfortunately, this is not often the case. The other side of the profit equation, costs, often increases along with sales, and if costs are not contained, the firm soon may find itself in a position of losing, rather than making, money. Thus, although Medco sales were increasing at a rapid rate, profits were remaining relatively constant.

Medco's problems certainly are not unique. Indeed, these are the classic symptoms of what we have termed “growing pains,” as will be described in detail in Chapter 5. It should be noted that while these “symptoms” represent problems in and of themselves, they also suggest a deeper, more systemic organizational problem. Specifically, they signal that the organization is coming precariously close to choking on its own growth. This, in turn, indicates that the organization must change its very nature; it must make a transition to a different kind of organization, a more professionally managed firm with processes and systems to facilitate growth.

The Need for Transitions

Bob Mason recognized that his business was experiencing problems. He realized that the organization had outgrown the current way it was being managed, and that both he and the organization needed to make some serious changes in the way things were being done.

His first step was to get deeper insight into the kinds of problems he was facing at Medco. He did a search for books that would help, and obtained a copy of an earlier edition of Growing Pains. After reading the book, he initiated action to help his company overcome the problems associated with growth. Specifically, he began a program of organizational development for Medco. The four specific steps in the program were as follows:

STEP I: Conduct an organizational assessment.

STEP II: Formulate an organizational development plan.

STEP III: Implement the organizational development plan.

STEP IV: Monitor progress.

Step I: Conduct an Organizational Assessment

An organizational assessment was performed to evaluate Medco's current state of development and future needs. The assessment involved collecting information from employees about their perceptions of Medco and its operations. One tool used in this process was the Growing Pains Survey©, which will be presented and described in Chapter 5. This survey measures the extent to which an organization is experiencing the 10 classic symptoms of growing pains.

At Medco, the scores on this survey ranged from 30 to 34, with an average score of 32. As explained further in Chapter 5, this indicated that the company was experiencing some “very significant problems,” which required immediate attention. Specifically, the assessment revealed that the company needed to:

• Better define organizational roles and responsibilities and linkages between roles.

• Help employees plan and budget their time.

• Develop a long-range business plan and a system for monitoring it.

• Increase the number of qualified present and potential managers.

• Identify the direction the company should take in the future.

• Reduce employee and departmental feelings that they always “needed to do it themselves” if a job was to get done correctly.

• Make meetings more efficient by developing written agendas and taking and distributing meeting minutes.

• Become profit oriented rather than strictly sales oriented.

Steps II–IV: Formulate and Implement an Organizational Development Plan and Monitor Progress

Having identified its organizational problems and developmental needs, Medco proceeded to the next step: designing and implementing a program that would resolve problems and help the company develop the infrastructure necessary to accommodate its rapid growth. Management met at a retreat to design a plan for the firm. The plan included specific action steps to overcome its problems.

Some of these steps were (1) acquisition of human resources and development of operational systems needed to support current operations and continued growth; (2) implementation of a strategic plan that clearly defined where the company was going, and how it was going to get there; (3) implementation of performance management systems to motivate people to achieve the company's goals; (4) design of a management and leadership development program to help people become better managers and overcome the “doer syndrome”; (5) development of a system to explicitly manage the corporate culture. In addition, Bob began to focus on making some important changes in his own role, behavior, and attitudes.

Acquisition of Resources and Development of Operational Systems . As the company grew, so did its need for greater skills and sophistication in certain functional areas. A controller was recruited to replace the firm's bookkeeper. A national sales manager was appointed. Medco also hired a personnel director and a marketing manager. Moreover, Medco engaged a consultant to serve as its adjunct management and organizational development adviser. In brief, the firm made a significant investment in its human resources. These people, in turn, were responsible for developing the day-to-day operational systems required to manage growth in various areas.

Implementing Strategic Planning . One of the first steps Medco took to manage its growth was to develop a strategic plan and begin implementing a formal strategic planning process. The major goal of this process was to motivate the company's managers to begin to take a longer-range view than “what's happening after lunch.” A related goal was to affect the corporate culture at Medco and make planning a way of life.

The process began with a two-day strategic planning retreat that focused on some fundamental issues necessary to guide the future development of the company, including:

1. What business is Medco in?

2. What are our competitive strengths and limitations?

3. Do we have a market niche?

4. What do we want to become in the long term?

5. What are the key factors responsible for our past success, and to what extent will they contribute to our future success?

6. What should our objectives and goals be for developing Medco as an organization?

7. What should our action plans be, and who is responsible for each action plan?

In addition to these generic strategic planning issues, which are relevant to all organizations, the company also examined certain company-specific strategic issues.

After the strategic planning retreat, a draft of a corporate strategic plan was prepared. This plan clearly identified the business that the company was in, its long-term goals, and its competitive strategy. The plan also included specific, measurable, time-dated, short-term goals – with each goal being assigned to a specific member of the senior leadership team. The plan was circulated among the firm's senior managers for their comments and input. It was revised and approved by Bob, and then distributed to all senior managers. The plan provided a “blueprint” for future development, including specific goals focused upon eliminating the problems leading to the company's growing pains.

Medco then held quarterly meetings to review the company's results, compare them with the plan, and make required adjustments. This signaled that the plan was more than merely a “paper plan” – it was a real management tool.

A key decision made by management during this retreat was to be more selective in accepting new business until the firm had digested its present growth by building the required infrastructure.

Performance Management Systems . Medco developed and implemented a more formal performance management system. A first step in this process was to develop a measurement system for tracking progress against each goal in the firm's strategic plan. These measurements were developed as part of an organizational development team meeting in which all of Medco's senior management participated. Once the measurements had been decided upon, the next step was for Medco to revise its information system so that the data required could be obtained. Some of the data came directly from the firm's accounting information system. For example, information about sales, gross margins, and net profitability came from this source. Other information had to be obtained separately. The firm's management team felt that one of the vital aspects of the business concerned the percentage of merchandise that was being shipped to dealers as opposed to end users. This information began to be monitored on a regular basis.

Management and Leadership Development . Bob and Medco's other senior managers realized that people were Medco's true asset. The firm's technology, products, and equipment were really not proprietary; the true differentiating factor was the motivation and skills of its people.

Recognizing this, Medco believed the company had to make an investment in building its management and leadership capabilities for two reasons. First, there simply was not a sufficient number of effective managers. Although many people had managerial titles and could recite the right buzzwords, relatively few were really behaving as managers. They were spending too much time as doers rather than managers. There was little true delegation, and insufficient effort was given to planning, organizing people, performance appraisal, and team training. Another need for management development was more symbolic. Bob recognized that some of the people who had helped build Medco to its current size were in jeopardy of becoming victims of the Peter Principle: They had been promoted to their level of incompetence. Bob felt that the company owed its people a chance to grow with it and he saw management development as a chance to provide them that opportunity. Quite frankly, he felt that if people had this opportunity and failed to grow, the organization could feel it had met its responsibilities to them.

To deal with these issues, Medco asked a consultant to design a management development program for its personnel. Two programs were developed: one for top managers and one for middle managers.

Corporate Culture . Although Bob Mason had been aware that his firm had a culture, he had never taken any serious steps to manage it. He had always wanted the firm to be sales oriented, aggressive, and profit oriented. He hadn't realized that there were also a great many other facets to the firm's culture, which had been embedded since the earliest days of its operation.

As the firm began to change, Bob became increasingly aware that he needed to manage the firm's corporate culture in order to reinforce the change. One of the unintended aspects of the firm's culture that had developed was that people felt that if they worked hard they should be rewarded regardless of the results. Bob felt that people needed to learn that hard work was simply not enough and that they had to be oriented toward bottom line results.

A second aspect of the firm's culture had been that decisions would be pushed up to Bob. Since Bob was acknowledged to be an entrepreneurial genius and since his personality had tended to lead to nuclear explosions whenever someone made a mistake, people naturally pushed decisions to his desk. Bob now wanted to reverse the culture, and push the decisions down to the lowest level of responsibility in the firm where they could be meaningfully made. The firm also tried to emphasize that under the new culture, mistakes would be examined, and corrected, but that people would not feel the brunt of a nuclear explosion if a mistake was made.

A third aspect of the Medco culture had been that “we're good crisis managers.” This meant that Medco managers had to learn to turn on a dime and solve whatever crises came up. Mason now wanted Medco to revise its culture to emphasize the importance of long-range planning. He wanted the culture to become one of “planning is a way of life at Medco.” A fourth aspect of the Medco culture had been “we're hands-on managers.” This needed to be revised so that managers stayed in touch with operations, but delegated responsibility to the lowest level capable of performing the required tasks.

One of the most important aspects of this change was that Bob, together with the senior managers, now realized that the management of the corporate culture was an important part of the strategic leadership function that they had to perform.

Changes in the CEO . Bob Mason realized that just as Medco had to change, so did he. His basic skills were as a salesman and as an entrepreneur. He had worked hard, and he had built a successful company. He had the title of president, but he realized he was not acting like a president.

In spite of the fact that he was the CEO of the company, Bob continued to spend too much time dealing with the technical and marketing aspects of the business. This is what he knew how to do, and this is what he enjoyed. He knew he was not devoting a sufficient amount of time to the broader aspects of organizational development.

Bob also understood that there were certain other problems with his management style and capabilities. In spite of the fact that his organization had grown substantially, he still wanted to control too many details of the business. He knew he still poked his nose into too many areas of the business. He began to understand that this was not only a problem that he was facing, but his behavior was seen as a role model by other managers in the organization who, in turn, were doing the same things at their level of responsibility.

The first change that Bob made was to decide to change. He then proceeded to redefine his concept of his role. He decided to spend more time on the planning and organizational development aspects of the business and less time in many of the technical areas. He made a decision to give up control over the marketing area by delegating more responsibility than he had in the past. He decided to change his leadership style from “making all decisions” to “involving the senior leadership team” in many of the decisions that needed to be made. There were always going to be decisions where he would, in effect, have to decide what was best for the company and then announce it to the organization. However, he decided to significantly increase the extent to which his senior managers were involved in planning overall organizational changes and in making day-to-day operational decisions.

Another aspect of Bob's behavior that needed to be changed was the way he was dealing with stress. Bob, like most entrepreneurs, was constantly under a great deal of pressure. Periodically he would “explode” or as one of his managers put it, “go nuclear.” When Bob went nuclear, everybody headed for the hills. If something went wrong, Bob might “nuke 'em” in a meeting. This had led, over time, to people avoiding bringing Bob bad news. In turn, this had created serious problems for the business because Bob was, at times, simply not in touch with information he and other senior managers needed to have to make effective decisions. As people began to see Bob dealing with conflict but not exploding, they became more open in discussing problems, and even disagreeing with the direction that Bob was proposing. His management team began to be a team in the true sense of the word.

Bob sent another signal to the organization about his willingness to change by participating in the organization's new management development program. As he stated: “If I want people to change, I've got to lead by example as well as by word.”

Program Results

For 18 months, Medco implemented its new program of organizational development. After this period, the organizational growing pains score decreased from an average score of 32, which put the company in a red-flag danger zone, to a score of 21, which indicated some problems but nothing of major concern. This improvement occurred despite the fact that the firm continued to grow. Moreover, the firm's profitability increased significantly during this period, as a wide variety of operational inefficiencies were eliminated.

In brief, Medco had made a fundamental transformation. It had gone from a firm about to choke on its own growth to one that was able to absorb growth and operate profitably and effectively. In addition, Bob Mason had made the transition from an entrepreneur to a true CEO.