Many companies, as good as they may be, engage in self-destructive behaviors. Some companies that seem to be doing well and are on top of their industry can, in a very short time, spiral downward into a disastrous cycle. These companies may possess top leaders and managers, have a proven track record of success, an excellent competitive position, and equally outstanding products and/or services. Why, then, do companies such as these go wrong? This question is one that has plagued academia for ages.
As companies grow they tend to organize themselves into “functional” and later “regional silos” – they divide themselves internally along functional and regional lines. Successful growth requires systematization and organization – rules, policies, and procedures. However, the various units into which companies organize themselves don’t always get along well with each other, for various reasons.
1The Self-Destructive Habits of Good Companies … And How to Break Them AUTHOR: Jagdish N. Sheth PUBLISHER: Wharton School Publishing 2010
Things that lead to the habit of territorial impulse:
- The corporate ivory tower – the CEO and his top management are insulated from day-to-day operations.
- Growth requires the institution of formal policies and procedures – a blizzard of rules and regulations can reduce communication between divisions.
- The founder’s culture is subsumed within a larger corporate culture and the informal, spontaneous culture is extinguished
- A company’s culture is dominated by one functional specialty. Every division has its own functional cultures and it’s very unhealthy for one to dominate over all the others.
The warning signs of territorial impulse:
- Dissension – a lot of headstrong lieutenants instead of one strong general.
- Indecision – decision-making is an agonizing or even impossible process.
- Confusion – one side doesn’t know what the other side is up to.
- Malaise – nobody’s happy.
How to break the territorial impulse habit:
- Engage in effective internal marketing – the leader must bring all the people together in a common cause.
- Push the managers out of the ivory tower – rotate the people in and out of different functional or geographic silos.
- Create permanent cross-functional teams – organize permanent management teams that include representation from all silos.
- Reorganize around customers or products rather than around function or geography.
How to prevent the habit of territorial impulse:
- Implement a transparent and predictable method for succession planning.
- Create a culture in which no one function is superior to another.
- Focus on an external driver to have functions operate as a coalition with a common goal.
- If a dominant subculture exists in a company, rotate people from that culture among the various functional silos.