By Brian Lucas
“Life in the fast lane, surely make you lose your mind. Life in the fast lane, everything all the time.” – the Eagles
Just like the title of the Eagles classic tune, “Life in the fast lane”, life at the C level today can make you crazy. Regardless of company size, succeeding at the C level is far more difficult than it ever was. The degree of this difficulty can most readily be seen in the fact that 64% of C level executives in North American Fortune 1000 companies do not want to be a CEO. That’s double the figure from 2001 with almost three fourths of the current CEOs thinking about quitting their jobs. Turnover amongst all levels of top management has increased. This is now the new norm.
This is despite the fact that the average CEO compensation is 209 times greater than the average employee’s pay. That is up from just 18 to 1 in 1965. For many of the rest of the C level, the days of privilege and perks are a thing of the past. The hours are now long and personal time and home life is often lost in the incessant demands of the job. The C level in a traditionally structured organization is now being forced to perform at a pace that is not sustainable. Reporting requirements are now dramatically increased and hold the CEO accountable for the validity of these reports.
Boards of directors are also holding CEOs to higher performance standards. This seems to fly in the face of golden parachutes and rewards for non-performance, but it is understandable in terms of the percentage of CEO failures (see my article “Why CEOs Fail in Today’s Agile Business Environment”). CEOs have considerably less time to succeed. They now have less than 18 months to prove themselves.
This has translated into increased pressure throughout the C level. Even back as far back as 2003, vice presidents of marketing in high tech firms began experiencing a 75% turnover. The chief marketing officer now lasts less than 2 years. This type of pressure will continue to mount with no end in sight. Where is this pressure coming from? Well… it’s coming from us actually, that is to say the consumer. We are all consumers in one way or another. Since the internet revolution, it is now much easier and requires much less capital to start a business. We also now live in a global economy, again thanks primarily to the internet. A consumer has almost unlimited choice and with the ease of the internet’s search capability; they usually gravitate to cheaper, quicker and sometimes even better. After all, the knowledge of a better product or service is only a click away. Never before was there a need to be more effective and efficient in an organization. The burning question in every C level person’s mind is how to bring this about.
Too often, C level executives turn to technology to solve this problem. Since the last decade US companies have wasted at least $65 billion on unneeded and $75 billion on failed technology projects. Technology can, of course, be part of the solution. The real answer however is people and organization structure. If you are a member of the C level you could ask yourself, “How is someone else doing what we are doing better because it is putting pressure on us?” The question you should ask yourself though is, “What does the customer want and really need now and what will they need and want in the future?”
To survive, you need to answer the first question to thrive you need to answer the second one. Knowing a customer’s requirements goes beyond importance. US corporations lose almost $100 billion annually through poor customer requirements and another $1.25 trillion in potential markets unrealized. Not only must you know these requirements, but you have to fulfill the need as effectively and efficiently as possible. If your solution is tighter command and control; your days are unfortunately numbered.
In the past and still seen today in most large corporations, companies are organized under a very hierarchic command and control model. This is where most of the thinking happens at the top and execution happens at the bottom. When products and services were simple this worked. However it required long value chains, ridged processes, and highly regimented thinking. This invariably leads to slow product and service delivery at high expense. Unfortunately, today products and services are complex and require knowledge workers to be a large part of the solution. To be effective, these people have to have a considerable freedom of operation and must be able to express themselves and their ideas without fear of reprisal or resistance in the structure.
What’s needed is an organization structure that nurtures self-directed workers and fosters a team mentality with an innate focus on the customer’s needs and the ability to change rapidly as the market dictates. This means a change in strategic management! The C level must unite to formulate this change and work towards a new organization structure. It’s a matter of not only their survival, but the enterprise’s as well.
Strategic management’s history is varied. Alfred Chandler, promoted an all-encompassing strategy for all the various aspects of management in his ground breaking work, “Strategy and Structure” and later on his Pulitzer Prize winning work, “The Visible Hand: The Managerial Revolution in American Business in 1977. Peter Drucker the phenomenally accurate futurist emphasized the importance of management by objectives (MBO) and predicting the importance of knowledge workers and intellectual capital. Philip Selznick defined the matching of organization internal aspects with the external environment known as SWOT (Strengths Weaknesses Opportunities Threats).
Strategic management has a direct effect on organization structure. Organization structure has, in fact, been affected by the various strategies of strategic management since the early days of capitalism and the product/service oriented strategy. We are now in the learning and agile strategy phase where businesses must change their structure fluidly in response to ever changing customer needs and market pressures. The need to precede market demands with organizational adaptability, which can anticipate those demands and meet them at the beginning of a cycle, is the difference between enterprise success or business failure. This agility requires that you shape your organizational structure (and business in general) in a lattice fashion. W. L. Gore wrote eloquently about adaptability in his groundbreaking work where he defined a lattice organization as follows:
A lattice organization is one that involves direct transactions, self-commitment, natural leadership, and lacks assigned or assumed authority. . . Every successful organization has a lattice organization that underlies the façade of authoritarian hierarchy. It is through these lattice organizations that things get done, and most of us delight in going around the formal procedures and doing things the straightforward and easy way.
This is a radical departure from the traditional hierarchic organization structure and line of authority. It presents the following fundamental change in philosophy:
- No fixed or assigned authority
- Sponsors (mentors) not bosses
- Natural leadership defined by followership
- Person-to-person communication
- Objectives set by those who must make things happen
- Tasks and functions organized through commitments
One way of accomplishing this is with a bifurcated organization structure with a functionally aligned workforce pool and a product and service organization where work is actually done. Assigning work by product or initiative gives the advantage of promoting team thinking and teamwork. The focus is on the success of the product or initiative and therefore the organization; rather than the individual. Managers of record act as workforce fulfillment agents for the Work Structure. They manage a pool of resources, conduct periodic reviews and deal with personnel issues. They build performance plans based on job descriptions derived from the organization plan driven by an amalgamation of needs identified by the product and service managers, behaviors defined in the vision, and individual goals created in career path planning. This is 50% of the review rating; the other 50% comes from team achievements against goals as recorded by their team facilitators. The functional organization matrix provides economy of scale advantages and proficiency of expertise while its hierarchical organization promotes clear lines of authority and performance rewarding. Individual employees report to this structure governing behavior, teams report to the Work Structure governing work assignments.
The chart below shows a simple version of this structure.
This is not a matrix structure; it is actually the evolution of a hybrid structure that is one step closer to a true latticed web structure or virtual corporation. The hierarchy is the financial and sponsor structure and more fixed. This gives stability. The work structure is highly flexible and environmentally responsive. The key concept is that individual employees report to one structure governing behavior. Teams report to another structure governing work. It does not have the limitation of being able to support only a few products or initiatives. It does require dual planning with the hierarchy supporting the product structure. The functional organizational structure exits as a servitor to the work related one.
This might seem complicated, but it is not. While it is true that you can have two or even more managers, none of their directions should be conflicting since they govern differing areas. As far as priorities are concerned, the various product or service managers settle any potential conflicts outside of the team setting. As a rule if you are doing agile you should be focusing on one initiative at a time anyway. Your hierarchy manager is a service manager that works to see that sufficient human resources are available to meet the needs of the product and service managers. If you are following scrum, the scrum master’s role is to facilitate and remove obstacles, not manage the release or iteration.
As you can see the structure is firm where solidity is needed and fluid where responsiveness is required and can interface with third parties and vendors in an organic fashion. In short, it is all things to all people. If this sounds too good to be true, like Bill Gore says you will find some form of this structure working at times very surreptitiously in all successful companies. The extent which this virtual organization identity has to “buck the system” determines how effective it is and usually the company’s success. Moving to this type of self-learning and agile structure is not easy.
It does not however, have to be done all at once. It can be done through increments as long as the new entity that is being created has the full support of everyone concerned. It’s truly amazing just how Machiavellian the old guard can be about protecting their turf regardless of who it hurts or even if it will bring down the whole company. If you want to end your pain at the C level you need to implement this kind of change or the pain will unfortunately only get worse. Like the Borg say in Star Trek The Next Generation, “Resistance is futile”. Till next time – Keep Agile.
 According to Burson-Marsteller
 According to Challenger, Gray & Christmas
 According to Booz Allen Hamilton
 According to the Economic Policy Institute
 As required by the Sarbanes-Oxley act
 From Burson-Marsteller’s Building CEO CapitalTM survey conducted with RoperASW.
 According to CRMGuru.com reports
 According to executive recruiting firm Spencer Stuart
 See Peter Drucker
 According to Morgan Stanley
 According to the Gartner Group
 According to the National Institute of Standards and Technology
 For more on this see my post “The imperative of having an agile organization structure” on my blog Keeping Agile