than he had in the past. He decided to change his leadership style from “making all decisions” to “involving the senior leadership team” in many of the decisions that needed to be made. There were always going to be decisions where he would, in effect, have to decide what was best for the company and then announce it to the organization. However, he decided to significantly increase the extent to which his senior managers were involved in planning overall organizational changes and in making day-to-day operational decisions.
Another aspect of Bob's behavior that needed to be changed was the way he was dealing with stress. Bob, like most entrepreneurs, was constantly under a great deal of pressure. Periodically he would “explode” or as one of his managers put it, “go nuclear.” When Bob went nuclear, everybody headed for the hills. If something went wrong, Bob might “nuke 'em” in a meeting. This had led, over time, to people avoiding bringing Bob bad news. In turn, this had created serious problems for the business because Bob was, at times, simply not in touch with information he and other senior managers needed to have to make effective decisions. As people began to see Bob dealing with conflict but not exploding, they became more open in discussing problems, and even disagreeing with the direction that Bob was proposing. His management team began to be a team in the true sense of the word.
Bob sent another signal to the organization about his willingness to change by participating in the organization's new management development program. As he stated: “If I want people to change, I've got to lead by example as well as by word.”
For 18 months, Medco implemented its new program of organizational development. After this period, the organizational growing pains score decreased from an average score of 32, which put the company in a red-flag danger zone, to a score of 21, which indicated some problems but nothing of major concern. This improvement occurred despite the fact that the firm continued to grow. Moreover, the firm's profitability increased significantly during this period, as a wide variety of operational inefficiencies were eliminated.
In brief, Medco had made a fundamental transformation. It had gone from a firm about to choke on its own growth to one that was able to absorb growth and operate profitably and effectively. In addition, Bob Mason had made the transition from an entrepreneur to a true CEO.
Summary
This chapter has examined the issues of success and failure typically facing organizations and their leaders after promising entrepreneurial starts. We have identified the need for continued success, and described the personal and organizational transitions to promote that continued success. We have identified and discussed the changes that the CEO needs to make as his or her organization grows, and we have examined the alternatives available to CEOs who face such transitions.
The chapter presents a comprehensive case example of the transitions required by Medco, which faced classic growing pains and developed strategies for addressing them. The steps that Medco took to identify its challenges and work to address them illustrate how an organization can build the infrastructure needed to promote sustainably successful growth. The personal challenges faced by Bob Mason, Medco's CEO, and how he addressed them provide a good example of how to make the personal transitions required to support an organization's continued successful development.
There is no one way to make a successful transition from an early-stage entrepreneurship to a future stage of growth. However, the key to making this change is for the entrepreneur to recognize that the company's former mode of operation will no longer be effective.
All change is accompanied by risk, and many of us feel uncomfortable during the process of change. Unfortunately, the need for organizational transitions and their accompanying personal changes is inevitable. Those who do not believe this are likely to increase the risk that their organizations will experience significant difficulties. However, if knowledge is truly power, then entrepreneurs and others who understand the need for the kind of transitions described in this book will be set up for the possibility of continuing success.
The remainder of this book deals with how to make these required personal and organizational transitions – beginning with the next chapter, which presents a framework (based upon research and experience) that identifies the key factors that must be focused upon in building a sustainably successful organization.
Chapter 2
Building Sustainably Successful Organizations®
As a new venture begins to grow, the CEO and other members of senior management must simultaneously cope with endless day-to-day problems and keep an eye on the future. Making this even more difficult is that many managers of growing entrepreneurships are going through the process of building an organization for the first time. This is about as easy as navigating uncharted waters in a leaky rowboat with an inexperienced crew while surrounded by a school of sharks. The sea is unfamiliar, the boat is clumsy, the skills needed are not readily apparent or not fully developed, and there is a constant reminder of the high costs of an error in judgment.
Just as the crew of such a boat might wish urgently for a guide to help them with navigation, training, and ship repair, the senior managers of a growing enterprise may frequently wish for a guide to help them build their organization. The crew might also be glad to know that others before them have made the voyage successfully and to hear some of the lessons that the other voyagers learned in the process.
This chapter attempts to provide a guide for senior managers who are faced with the special challenge of building a sustainably successful company. It gives a framework or “lens” for understanding and managing the critical tasks that an organization must perform at each stage of its growth. The framework for organizational development that is presented in this chapter is an outgrowth of nearly four decades of research and consulting experience with organizations who have faced and dealt with the need to make a transition from one stage of growth to the next.
The Nature of Organizational Development
Organizational development is the process of planning and implementing changes in the overall capabilities of an enterprise in order to increase its operating effectiveness and profitability. It involves thinking about a business organization (or any organization, for that matter) as a whole and planning necessary changes in certain key areas in order to help it progress successfully from one stage of growth to the next. Based upon our empirical research and experience, the key areas that require focus include the organization's business foundation (the conceptual foundation on which the rest of the company's systems and processes are built), as well as six key organizational development tasks.
All business or economic organizations (including nonprofits) are based upon a conceptual foundation, which is either explicitly defined or implicitly understood. The foundation consists of three related concepts: (1) the business concept or definition, (2) the strategic mission, and (3) the core strategy.
The Business Concept . A business concept is a statement of what the organization is in business to do. It defines an organization's identity and gives it strategic focus. It provides the raison d'etre of the business. For example, Coca-Cola is in the beverage business, Federal Express is in the package transportation business, and Disney is in the entertainment business.
The overriding key problem or challenge of creating a business concept is that it must be valid or validated by customers in the marketplace. This means that the business must provide something (tangible or intangible) that the market wants or will accept. Validation occurs when there are customers who purchase the enterprise's product or service, thereby enabling it to continue to operate and survive as a business entity. When a new business concept fails to achieve this, or an existing business concept no longer works in the market, the organization will suffer and ultimately fail or die. For example, many of the first dot-coms
