Insane corporate efficiency – part 4

If you have been following this thread, you are probably getting the idea that you cannot increase corporate efficiency at the cost of destroying the corporate culture. The corporate culture is the spirit of the company and if it goes psychotic, the company will destroy itself over time.

A corporate culture can evolve from a bunch of guys in a garage to corporate campuses scattered around the world, but it has to evolve naturally, with the consent of those who hold the culture together.

In the process of growing a company, some apparently logical changes can be made which can trigger a breakdown in corporate culture. Some of these changes can even bring about open warfare between departments and divisions in the same company.

To give you a simple example, if an expanding company creates duplicate functions within its organization and does not separate these functions geographically, the groups must compete for resources, customers, financing and you have a recipe for disaster.

Any organization which assigns duplicate charters to groups or individuals automatically creates a nightmare situation for the people involved. This is seen most often when a manager tells several different people to solve a problem and does not put someone in charge of the activity. Often the individuals involved do not know that anyone else is working on the problem. When they find out, as they always do, the ensuing slump in morale may be permanent.

Companies which create overlapping sales territories where the salespersons are compensated on a commission basis are setting up a situation where "cherry picking" becomes a necessity for survival in the field. Customer service suffers as a result.

Changing commission structures to "save money" is another sure trigger for unrest and eventual defections. I have seen more than one company reduce sales commissions when the top salespeople exceed their targets instead of rejoicing that they have achieved increased revenues and profits. The fact that these salespeople had to scramble to develop a territory is somehow lost in the rush to bring their compensation back into "line".

When a top salesman makes as much or more than the president of the company, this is a killer, because it invariably causes management to change the compensation arrangements, even though the relative cost of sales has not changed. This betrayal of trust usually damages the corporate culture in ways that affect its long-term growth.

There is no question that sales compensation must change as a product moves from a novelty to a commodity, but this is something that can be planned for and incorporated into the corporate culture.

Finally, there is the matter of one corporate culture absorbing another. A corporate culture acts to protect itself from foreign invaders.

Every acquisition has to deal with this and there seems to be a high rejection rate, as the absorbed employees are sloughed off when the transplant fails. The transplanted employees and products also cause problems for those in the acquiring company who feel they are being replaced or overshadowed.

I was in one company which acquired many small companies for their superior technology and their expertise. It was a matter of general observation that in most cases, the employees of the acquiring company managed to avoid using the technology or designed around it. After several years, one would see no trace of the acquired company’s products or employees, except where they were accepted by the corporate culture.

The next post will address those who "game the system" and what that does to the corporate culture in those companies which seek salvation through superior numbers rather than actual products and services in the hands of customers.

Tag: corporate insanity