When CEOs Have To Go Back To The Drawing Board

When enjoying consistent growth (and making money) there is a tendency to add needed resources by ‘tucking’ them into the existing organizational structure. Here's why that doesn't work.Remember when you opened your first office or moved your operations into a larger building?  The design and layout was damn near perfect! Workflow was optimized and yet you had provided for future growth and expansion. And then, of all things, your business plan worked so well that you had to add more people and equipment than you had planned and what started as an ideal ergonomic work environment was becoming dysfunctional.

Organizations can evolve in much the same way. When enjoying consistent growth (and making money) there is a tendency to add needed resources by ‘tucking’ them into the existing organizational structure; it just seems easier that way. Eventually though, like the offices or building you outgrew, your organization can also become dysfunctional. If that happens, your ability to serve your customers will likely become impaired.

I faced this dilemma with many clients over the years and seldom had difficulty getting them to acknowledge the need to ‘restructure for success.’ Instead, my challenge was to help them avoid making piecemeal adjustments without an end game in mind. The experience that follows describes one approach to developing such an end game.

For years, a privately held manufacturing company had enjoyed making dozens of low volume products for hundreds of customers. It was in a sweet spot until one of its technologies, perhaps more by happenstance than by plan, was found to be well suited for use in a major new product with a fragmented supply chain. Within three years the technology generated revenues at least four times those of the traditional core business and the up curve showed no signs of tapering off.  Trying to keep up, let alone get ahead of the curve, the company was hiring hourly and salaried people almost every week and investing millions in brick and mortar and equipment.

Each day was tougher than the last; customers in the original core business were being disappointed, customers for the new technology were beginning to doubt the company’s ability to support them and of course, employees were stressed.  Dysfunction prevailed!

We set aside two full days with the executive team to develop a plan to realign resources to match more closely both current and expected future market conditions. Boy…who wants to attend a meeting like that? We had maybe a dozen in attendance and I opened with this preamble: ‘we all just formed an investment company and each of us leveraged everything we have, house, college funds, retirement funds and even borrowings from relatives! Lucky us, we just bought the assets of this company and now must figure out how to structure it so we can get our money out with a proper return.’

The plan was to develop an organization chart by title and function. Then, and only then, would we look at the qualifications of the employees who, under the theoretical buy, were no longer working for the company unless we invited them back. I cautioned—some boxes on the organization chart will likely remain unfilled if we do not see qualified candidates among the company’s ‘former’ employee base and some ‘former’ employees may not get their name written into a box.

The shocker of all; I went to the grease board and drew the top slots, you know, president, controller, COO etc.  I then I’d kick things off and fill in the COO box with the name of the incumbent. He immediately reacted saying in essence, ‘not so fast, I may no longer be the best person for that job.’ A pivotal moment! You might guess that the two day session that followed was highly productive.  The executive team, best qualified to do so, did their job well and emerged with a comprehensive plan to transition the company structure to be far more responsive to its markets and customers. A footnote: if memory serves me correctly, the incumbent COO eventually moved into an R&D leadership role.

Lesson learned: the design and efficiency of an organization is even more important than that of the facilities in which it resides!

Read more: 12 Strategies For Innovating Through A Downturn

Fred Engelfried is Director/Chair of North Coast Holdings, Inc. and its subsidiary Lewis Tree Service, Inc. He has been a member of the board of directors of Lewis for over 20 years, and for 10 years prior to that worked with the company intermittently in various consulting capacities. He also is President of Market Sense Inc., a participative management firm that has served more than 100 regional clients over 35 years.