Infighting, Turf Wars and Self-Preservation
The advent of management systems in the 20th century was a much-needed innovation to control masses of workers, unstable resources, complex assembly lines, and distribution channels never seen before the industrial revolution. Managers were viewed as heroes who came in and developed systems to tame the unruly beasts known as business organizations. Visionaries like Henry Ford and John D. Rockefeller created complex metrics and automated systems to harness the maximum production of man and machine.
But with these systems came the ugly by-products of bureaucracy, political entrenchment and self-perpetuation. More and more, managers became bureaucrats making decisions based on their private agendas and instinct to survive.
It was a classic case of the dark side of human nature taking over? People routinely rejected the call to give up power in order to usher in a more qualified leader or superior plan of action? No one was willing to go quietly into the night? Only one thought prevailed and that was the ability to survive at all cost.
A composite of this survival mentality can be seen in the current gridlock between the White House and both Houses of Congress. Everyone knows the systems of healthcare, education and tax assessment are broken. But with so many vested interests and political agendas, how can enough people come together to fix the problem.
Look at it this way. If 50% of your campaign contributions came from the beer companies, what kind of selfless, high principled Ralph Nader crusader would you have to be to vote for a ban on alcohol?
I can hear you now. “Distinguished ladies and gentlemen of the House of Representatives, my humble recommendation is that we adjourn for the weekend and settle our minor differences over an ingenuously drunken delectation of Budweiser mini-kegs.”
So it has become with managers, drunk on power within the corporations. Territorial wars are being waged, power struggles continue to escalate and precious human capital is being expended on issues which have nothing to do with the efficiency of the organization.
I mentioned the Hershey’s Corporation’s entire Board of Directors resigning. This is an excellent example of the ongoing power struggles that persist in most large organizations. To make a long story short, the Hershey’s Board of Directors, along with the CEO, is responsible for running the company. But the charitable trust, the Hershey’s Trust Board, has veto power over everything the corporate board does. Back in 2002, Wrigley offered to buy Hershey’s for the sweet sum of $12.5 billion. The CEO and corporate board said yes, but the Trust Board turned it down. And then the Trust Board proceeded to announce publicly that it was unhappy with the corporation’s earning performance.
Hey, isn’t this the same corporation that garnered a $12.5 billion buyout offer with a hefty premium over the stock price, an offer you “Trust Board” people just turned down?
Another nasty fight broke out when, against the wishes of powerful board members, Hewlett-Packard acquired Compaq Computer in a $25 billion stock swap. When the dust settled, Carleton “Carly” Fiorina, the first woman chairman and chief executive of HP, was forced to resign.
There are thousands of stories of power struggles and infighting throughout corporate America. The problem is, with the hyperactive, accelerated volatility of the marketplace, these unproductive management practices have placed respective companies in jeopardy.
Globalization, deregulation, accelerated convergence, protracted litigation strategies and rapid technological innovation have combined in a perfect storm of destruction to wipe out formidable, well known, highly-praised market leaders in the blink of an eye.
Perhaps, you remember when Blockbuster Video was king of the hill. Back in 1985, using a Wal-Mart style brick and mortar business model, Blockbuster entered the video tape and DVD rental market, quickly driving many of its mom-and-pop competitors out of business. By 2004, Blockbuster was a cash cow with 9100 stores in 25 countries, and a commanding market share of 40%.
Then along came a spider and sat down beside her. Its name was Netflix which had developed a “cool” Xer-friendly process by which customers could sign up online for a monthly subscription and have the movies delivered to their door. With the population growing more time-starved and internet credit card transactions becoming more trustworthy, the marketplace opened up to a viable alternative to visiting physical locations. Years earlier. change and diversification of product deliver had been discussed within Blockbuster’s strategic brain trust. But opposing views created a stalemate and nothing was done until it was too late.
The primary problem Netflix created for Blockbuster was the elimination of $250 million in late fee revenue to which the company had grown accustomed. It also put pressure on Blockbuster to create an online interface equal to or better than Netflix’s user-friendly approach in delivering the same product. Even with $3 billion in revenue in 2009, Blockbuster’s outdated business model was still in deep water.
Fast-forward to 2010:
Dearly beloved, we are gathered together today to announce the bankruptcy filing of Blockbuster Video. Those of you who spent so many years paying late fees and standing in line, waiting for a movie to come in, will have to find some other form of amusement to occupy your time.
I know what I’m going to do. I’m going over to Washington Mutual Bank, draw some money out of my account and go to Circuit City to buy me some VCR movies. The GM dealership is on the way. Maybe, I’ll stop by to see if the new Saturn Vue has come in, or maybe test drive a new Pontiac G8. All that shopping is sure to make me hungry, so I’ll waltz into Steak & Ale to have a glass of that upscale Charles Shaw Merlot 2001 and devour one of those great salads.
You get the picture. In these turbulent times, you are here today and gone tomorrow … no, gone today.
This may come as a shock to you, but the primary reason for these ongoing internal confrontations and non-negotiable stalemates is the classic battle between innovation and status quo. There are hundreds of books on change management because the implementation of change in an organization can be a company’s worst nightmare.
Within the bureaucracies that have built up over the years, the flashpoint is not about who’s right and who’s wrong, or what’s best for the company and what’s not best. Instead, it is about who will benefit and who will suffer.
If I manage the East coast units and you manage the West Coast units, and the company decides to merge all units, who will be the manager left standing? And if it’s not me, how will that impact my career path and salary?
Let me rehearse my recommendations out loud:
I don’t think it’s a good idea.
It doesn’t make sense for our operation.
The timing is not right.
It’s going to cost too much.
It’s going to cause confusion and send the wrong signal.
We need to study it a bit longer.
As an entrepreneur, it’s important you recognize how change will potentially be received within your organization. There is a fear factor, followed by an effort to discourage or even sabotage the new agenda. Don’t take it personal. People are just trying to survive.
Resistance to change extends far beyond the business arena. Austrian economist Joseph Schumpeter refers to a century old cultural phenomenon that perpetually opposes change, especially change based on accelerated growth. It’s called creative destruction. It’s the belief that as the creative process unfolds, rapid change always destroys the old to make way for the new. In that process, it detaches us from our roots and those values, priorities and beliefs that made us who we are.
The industrial revolution is an excellent example of this phenomenon. It unraveled our agrarian society, displaced family units, elevated corruption and greed, took mothers out of the home and into the factories, polluted the air, drove up prices and in essence, changed the world forever. But in the process, it made us the most powerful nation in the world.
That is still the most profound argument against using creative destruction as a justification to resist change. We simply cannot ignore the end results. Whether we agree with it or not, change has always been the engine that gave us the potential to sore like eagles, to be better in the future than we were in the past.
But change is a two-edged sword. It can reward as well as destroy. In fact, most effective change cannot be implemented without creating casualties. Thus, we find ourselves face to face with the original dilemma that continues to polarize large organizations. If change is implemented, who will be left standing? Who will the casualties be?
Pressured by an evolving marketplace, and desperately needing innovation in order to survive, most small businesses have no choice. They must constantly embrace change. This mindset, along with the minimal bureaucracy through which change must flow, gives small businesses a strategic advantage over large corporations. Remember, the more layers of management within an organization, the greater the chances change will be suppressed.
In his book, The Innovator’s Dilemma, Clayton M. Christensen explains how difficult it is for innovation to reach the top. Resistance, especially in the United States, is built into the current management apparatus. And with capital in the bank, there is no need to correct bad market assumptions right away.
With small business organizations, however, innovation has a much better chance of surviving and actually being implemented. The bureaucracy that lobbies for the status quo will not have been firmly established in your company. This gives you a competitive advantage to receive, evaluate, and implement game-changing strategies before large business can capitalize on the opportunity.
Based on what the deep-thinkers are saying, are all businesses and management systems in trouble?
The simple answer is yes, to varying degrees. I’m sure it would be difficult to envision Google, with a stock price hovering above $525 per share, being in trouble. But eighteen years ago, Blockbuster was where Google is now. The prevailing wisdom suggests all companies have points of vulnerability. We wake up in the morning and hear on the news that someone has created a Google worm which has permanently destroyed all of its servers and stolen all of its proprietary secrets. Then what?