Wednesday, July 05, 2006

A Lesson In Corporate Knife Fighting

Periodically we see in the news papers or a trade journal that some executive has elected to retire or is leaving his cushy job to “pursue other interests” or to “spend more time with his family”. Of course most other executives know these are simply code words for identifying the loser in some sort of corporate power struggle and the other interests and time spent with the family are simply euphemisms for “seeking other employment”. What people outside of the executive ranks rarely see or understand is that life in the executive suite is frequently brutal and everyday is like a fight in an alley way. The following is a sample of how these things go and is based on an actual situation.

The Executive Vice President had five Industry Groups reporting to him, each headed by a Divisional Vice President. Of these five one was ready for retirement, two were asleep at the switch, and the remaining two were predators, and each was intent on becoming President of the company some day. The Predators realized that the only competition they had came from each other so they were very competitive with each other and largely ignored the others. Without any warning the Executive Vice President left the company and the President appointed the near-to-retirement (NTR),Vice President to replace him. This was a stunning turn of events to the Predators since neither of them was chosen. However, it was clear the appointment of the NTR Vice President was simply a place holder, pending the selection of permanent replacement, so all was not yet lost.

The Predators formed a peace pact and began to work together to divide the spoils and the power. The plan was to convince the new VP to divide his Industry Group between the two Predators and thus not replace himself. The plan worked like a charm. The spoils were divided, their power base expanded, and then the bomb dropped. The NTR VP announced that he was planning on completely reorganizing the divisions and would be bringing in a new executive to help in the organization. The Predators immediately closed ranks and launched an attack on this totally dumb idea. It was a dumb idea because it immediately provided them with a logical competitor for the EVP slot when the NTR VP retired. They used every argument and rationale they could to prevent bringing in an outsider. However, they were caught off-guard and so were unable to mount an effective opposition before the new executive was hired.

Of course the new executive had no idea regarding who any of the players were. The President and the NTR VP had recruited him from the outside to assist in a reorganization effort. Beyond that he knew nothing and certainly was not warned about the competitive nature of his colleagues.

The Predators welcomed him with open arms, each vying with the other to be the most cooperative. They provided him with documentation (by the box), had key individuals brief him (by the hour), submitted recommendations and suggestions almost daily. Of course the documentation was randomly boxed, the briefings tangential to the objective, and the suggestions and recommendations conflicting. Meanwhile the Predators were complaining to the President that the reorganization plan was dragging them down, the new executive was working too slowly, and things were really better like they were and the reorganization was unnecessary. The new executive was unaware of this background action and continued to try to sort out the current situation while trying to put together a new organizational plan.

To some extent the rearguard action was successful because the NTR VP announced that the reorganization plan was going slower than expected so in the interim he was going to re-establish the old organization. This meant pulling the units that formerly reported to him out of the Predators Divisions and re-creating the Industry Group that he formerly led. The new executive would be the Divisional Vice President responsible for the reconstituted Industry Group. This was an unexpected turn of events, but the Predators knew how to handle a situation like this. They simply sorted the employees by contribution, established the bottom performers, and transferred them to the new executive, swearing of course that he was taking their very best people. The new Industry Group floundered about while the new executive attempted to get it organized. The Predators continued their attack except it was now on two fronts. The reorganization plan was dragging on forever, and the new Industry Group was dragging all of the other Divisions down.

The new executive was the new kid on the block but he came from a tough neighborhood. He realized what was going on and launched a counterattack. First he hired some managers from outside, people whom he knew and trusted. These replaced the deadwood that the Predators so generously gave him. He then went to the two Divisional Vice Presidents who were asleep at the switch. As the new executive suspected they were really not asleep, just lacking a leader. He enlisted their support, got them to agree to give him some experienced people and to quietly help him with the reorganization. Within a very short time, the new Industry Group was showing real progress and the reorganization was secretly submitted to the President, which he accepted.

The NTR VP retired and was replaced by the new executive who was promoted to Executive Vice President on the basis of his demonstrated leadership and performance. He had rebuilt the Industry Group, reorganized the Industry Divisions, and established himself as a leader. The new organization called for the two Divisional Vice Presidents who had been asleep at the switch to absorb the Industry Groups formerly led by the Predators. The Predators were fired.

Obviously this scenario was fraught with risks for all of the players as well as the company, but it was the arrogance of the Predators that brought them down. They were blinded by their own belief that they were the only ones qualified to succeed to the position of Executive Vice President. When the NTR VP was initially appointed they failed to see that they had been evaluated and found wanting. Instead they chose to believe the appointment of the NTR VP was ceremonial pending his retirement and that one of them would takeover when that happened. This smugness led to a series of risk decisions that ultimately led to their downfall. First they assumed their two colleagues were either unaware of their competitive games or were not competitors themselves. This was a risk decision that they made and chose incorrectly. Next they made a risk decision in badgering the NTR VP to consolidate his division into theirs. There was a reason that Division existed to begin with and its consolidation would certainly raise questions.

The fatal turn of events for the Predators occurred when they failed to correctly assess the sudden decision to hire an outside executive to reorganize the Industry Groups. If this decision had solely been the NTR VP's, then why would he have consolidated the divisions in the first place? Why wouldn't he have reorganized at that point? The next risk assessment failure was not questioning the decision to bring in an outside executive to conduct the reorganization. At that point the Predators should have understood that there was a force behind these events beyond the NTR VP, instead of accepting the fact that their stars had set, they took their attack to the President. Obviously they assumed he either did not know what was going on or would accept their assessment that he had hired a turkey. That is a message very few Presidents want to receive. And finally, they underestimated the quality and skill of the new executive. They risked everything on their ability to bring him down. They did not even consider that the President might have hired him, as their new boss. Rather than attempt to ingratiate themselves they attacked him thinking that he had little support. So there you have it, a whole series of conscious and unconscious risk decisions that ultimately brought two high flyers to the ground. Candid self-appraisal is as important as a candid assessment to the risks surrounding a decision.

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