UK: RESIST THAT URGE TO REORGANISE.

UK: RESIST THAT URGE TO REORGANISE. - No amount of reorganising and reshuffling will increase the long-term capability of a business, says Robert Heller, unless you suit the organisation to the people and to a genuinely shared purpose.

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Last Updated: 31 Aug 2010

No amount of reorganising and reshuffling will increase the long-term capability of a business, says Robert Heller, unless you suit the organisation to the people and to a genuinely shared purpose.

'One Statement of Purpose, one Vision, five values, six goals, seven strategic priorities, and eight Key Performance Indicators'. This litany of modern management has won deserved scorn since the Learmont report revealed its currency under Derek Lewis's management of the prison service. The 28 elements are a dead giveaway: this is management by lip-service taken to ludicrous extremes.

It's a common resort when chief executives try to apply business methods to organisations which are not businesses. Lewis's lingo is reminiscent of John Birt's verbal efforts to shift the BBC from its public service mind-set: 'Birtspeak' has passed into the language. General Sir John Learmont, as a good military man, will have none of this nonsense. Citing lack of 'any clear correlation' between the 28, he called them 'a recipe for total confusion and exasperation'.

The absence of correlation, prima facie, is something of a mystery. Purpose and vision (why both?) are supposed to cascade down to missions, goals, etc, in intimate linkage. Equally important, lower ranks are meant to play a full role in forming and agreeing this framework. Just as the general would have expected in the army, each officer/executive then knows his aims, has clear responsibilities, knows how those objectives will be tackled, communicates the plan clearly to his troops - and ensures that action suits the words.

Without effective action, words, however wonderful, mean nothing. Lewis talked a great prison service - but gross problems of morale abound. The reasons are obvious, such as class distinction between the uniformed staff and higher management; lack of personal recognition; constant head office shuffling. One senior executive cited the famous indictment by Gaius Petronius of commanders who 'meet any new situation by reorganising' - and General Gus Pagonis, hero of the war-winning logistics of Desert Storm, shares the Roman's views.

Writing in the McKinsey Quarterly, he noted that boards 'insist' on reorganising, which 'is the worst thing a corporation can do'. British Gas should appreciate the force of his criticism. In one of the worst runs of bad luck, or bad management, recorded by a major firm, it seems to be criss-crossed by fault lines. One of the most serious is deterioration in service, which management itself blames on the short-term consequences of the reorganisation that divided the group into discrete, measurable parts.

This response to organising a multi-faceted company is conventional, but not compulsory. At IBM, Lou Gerstner attracted wide criticism for reversing engines and committing IBM to a continuing monolithic future. Back in July, he crowed proudly that events had proved him right: 'The industry's coming back our way' - towards one-stop shopping. But the misfortunes of IBM's PC business might well have been lessened by separation from the overweight parent body.

Organisation proves itself, not by paper logic, but by practical outcomes. When paper recipes are swallowed whole, however, nonsenses abound. Thus, the conventional approach valued the Red Star parcel service at £1, and sold it for that derisory sum; because, once British Rail's costs were allocated to the separated business, it proved madly unprofitable. But was the allocation practical? Did it include fixed costs that would have been incurred anyway, and which are still being paid - but without the benefit of the Red Star revenues?

At the BBC, too, charging producers for, say, library services sounds fair and businesslike. But you either have a library or you don't. If you're the BBC, you clearly do - a broadcasting service can't function without archive material. Charging users merely robs Peter to pay Paul: worse, if they are deterred from using the facility, utilisation of expensive assets will uneconomically fall.

Like Birtspeak and the Lewis 28, the constant shufflings and reshufflings of reorganisation are not good management per se: rather, they express profound uncertainty. In trying to manage the unmanageable, unsure executives cover their tracks with language and confuse the real issues. Lewis, for instance, praised himself for having met 14 of the 15 criteria laid down by the Home Office. But what if these were the wrong objectives? Was the stable being kept much cleaner while the horse (or rather the prisoners) bolted?

Neat structural organisation and good management are not synonymous. The contrary view gained credibility from the early work at McKinsey of Robert Waterman, Tom Peters and others. Waterman, however, quickly saw that true organisation wasn't about structure, but about increasing the long-term capability of the business. That hinges fundamentally on people and relationships between them. So, in McKinsey's once-famous 7S model, three of the seven were people-oriented: style, skills and staff.

You will find it hard, in the outfits mentioned above, to discover many 'human resources' who hymn the enhanced capability which reorganisation has achieved. One word in Lewis's litany holds the key: purpose. Suit organisation to people and to genuinely shared purpose, and it will work. Otherwise, everybody will want to escape from their management prisons.

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