A Case of Organizational Change

The discussion of the best way to structure a given organization sometimes causes lively debate here at Bellrock. Recently we assessed two organizational structure options for Division B, a $20 million / year business unit in a $200 million/year company. The division’s co-founders, John and Paul, have very different skills and orientations. Their shared leadership responsibilities were working, but not optimally, and it had become clear that to achieve their aggressive growth plan a single decision maker for strategic, cultural, and organizational issues was necessary. John’s performance was much stronger than Paul’s and he was the clear heir apparent. The problem was how to promote John without alienating (and possibly losing) Paul.

The division ran independently from the organization – it was a company within the company – and the CEO was removed from the division’s day-to-day operation even though he was still the decision maker. While the long-term strategy was to promote a single leader and have the entire division report to that person (Option A below), the CEO proposed an interim step (Option B).

The CEO believed a staged approach to the change was more appropriate, with John responsible for strategy and execution but Paul continuing to report directly to the CEO. He felt this approach was less risky, and was concerned that if John was promoted over Paul, Paul would begin looking to their competitors. John was worried about that too, but also thought the staged approach would make Paul feel slighted and insecure in his position. They’d lose him anyway, and that loss would be more difficult down the road.

John believed that the division needed only one leader, and that the one leader was him. He understood that Option A was the best choice for the organization, but wondered what they could actually execute while mitigating the risk of losing Paul.

The question really shouldn’t have been whether A or B was better. Instead, John, Paul and the CEO need to consider how to implement Option A while minimizing risk.

No matter which option they choose, John will end up as Paul’s manager. Implementing the interim step of John as leader with Paul continuing to report to the CEO has the potential to make Paul paranoid about what will come next and will weaken John’s effectiveness as leader. The business will not operate as effectively as it could and Paul will likely leave anyway, eventually, as his power is diminished.

The Path to Organizational Change

1. Clarify the goals of the organization – what does the market want, what is the division trying to accomplish and is there a match? If so:
2. What activities need to be done to accomplish the goal. With a list of those activities in hand, assign them to the positions on the Option A Organization Chart – list the positions, but not people’s names in the boxes.
3. Now figure out who is best to staff those positions.

Instead, we recommended that John begin acting as a leader by initiating the steps necessary for any reorganization and putting the needs of the company first, and the desires of the individual players second. He should do so while forging a stronger consultative relationship with Paul. If he presents either alternative as a fait accompli Paul will feel cornered into something he didn’t want. But gaining Paul’s buy-in that something needs to change in order for them to become more nimble and reach their goals, should be a relatively easy win. Once they have a common goal, he can include Paul in the process of developing the solution. This should result in Paul’s stronger engagement in the organization. If not, at least the relationship will be more open. John will have a better sense of what Paul is thinking and more time to help him realize the benefits of remaining in his role.

John liked this advice but was reluctant to make the recommendation to the CEO. Option B, a softer, slower path to change, felt less risky. At Bellrock we see people make that choice all the time too. But they later realize the inefficiency they baked into the organization through that staged approach was far more costly than they had imagined. Fear is a hard emotion to overcome, and fear makes people avoid and minimize risk, sometimes to the detriment of the organization as a whole.

What has your experience been? Have you ever seen an option B choice in action? Let us know how it went in the comments.