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Home News Archive Strategy Like Peanut Butter? Consider a Radical Reorganization!

Strategy Like Peanut Butter? Consider a Radical Reorganization!

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We are indebted to Scott Eblin and Govexec.com for bringing to our attention an amazing call for action--a internal memo leaked to the media and originally published by The Wall Street Journal on its front page in November, 2006.  Although written for his leadership team colleagues at Yahoo!, Brad Garlinghouse's memo ought to ring true for many of those in the Aerospace/Defense industry, burdened by bureaucracy and a lack of accountability for results.  But before the memo, a bit of context ....

Recently, a young lady left one of the Top 5 A&D companies for a new career at one of the large oil companies. This young lady had graduated a year before from the University of Southern California with a B.S. in Industrial Systems Engineering, and had been hired as a Manufacturing Engineer.  Roughly a year later, she departed, frustrated with the company environment.  In her words,

Business units did not work together so the teams I worked on were  very dysfunctional.  It was always a blame game between different  units when problems arose, and every group was constantly trying to  get out of doing work by saying it was another groups  responsibility.  I am a person who will jump to fix something when I  see a problem, but in this environment I was discouraged from doing  this because "it was not our job."  Also, people did not show up on  time to meetings even when they were with third party companies,  which I thought was embarrassingly unprofessional.  ... I talked  to some people at [company] about it; several people were on my page  but others were very anti-change.  I [think] the majority of upper  management understands the problem, but there is an inability to  implement cultural change because the majority of employees have  been there 20 plus years and are very stuck in their ways. Hopefully they [will start] to work together or I am afraid more  individuals will leave the company out of frustration.

Does this sound familiar?  Is this disillusioned young engineer describing your company?  Is there anything that can be done?
Matrix Management

Now, back to the memo, written by Brad Garlinghouse (a Senior Vice President at Yahoo!) in 2006. It describes how Yahoo! suffered from some of the problems described above, and what he proposed to do about it.  With hindsight, we can note that his "peanut butter manifesto" was not fully implemented, nor was it entirely successful--but it nonetheless stands out as clarion call for management action that should be trumpeted by many (if not all) leaders in A&D management, if they are to address the issues facing the industry.

Mr. Garlinghouse wrote the following to his colleagues:

I believe that we must embrace our problems and challenges and that  we must take decisive action.  We have the opportunity -- in fact  the invitation -- to send a strong, clear and powerful message ...  that we recognize and understand our problems, and that we are  charting a course for fundamental change.  Our current course and  speed simply will not get us there.  Short-term band-aids will not  get us there.
We lack a focused, cohesive vision for our company.  We want to  do everything and be everything -- to everyone. ... We are reactive  instead of charting an unwavering course. We are separated into  silos that far too frequently don't talk to each other. And when we do talk, it isn't to collaborate on a clearly focused strategy, but  rather to argue and fight about ownership, strategies and tactics. Our inclination and proclivity to repeatedly hire leaders from  outside the company results in disparate visions of what winning  looks like -- rather than a leadership team rallying around a single  cohesive strategy.  I've heard our strategy described as spreading peanut butter across the myriad opportunities...The result: a thin layer of investment spread across everything we do  and thus we focus on nothing in particular....
We lack clarity of ownership and accountability.  The most  painful manifestation of this is the massive redundancy that exists  throughout the organization.  We now operate in an organization  structure -- admittedly created with the best of intentions -- that  has become overly bureaucratic.  For far too many employees, there  is another person with dramatically similar and overlapping  responsibilities.  This slows us down and burdens our company with  unnecessary costs.  Equally problematic, at what point in the  organization does someone really OWN the success of their product or  service or feature? ... there are so many people in charge (or  believe that they are in charge) that it's not clear if anyone is in  charge.  This forces decisions to be pushed up -- rather than down. It forces decisions by committee or consensus and discourages the  innovators from breaking the mold ... thinking outside the box. ...
We lack decisiveness.  Combine a lack of focus with unclear  ownership, and the result is that decisions are either not made or are made when it is already too late.  Without a clear and focused  vision, and without complete clarity of ownership, we lack a macro  perspective to guide our decisions and visibility into who should  make those decisions.  We are repeatedly stymied by challenging and  hairy decisions.  We are held hostage by our analysis paralysis.  We  end up with competing (or redundant) initiatives and synergistic  opportunities living in different silos of our company. ...
We have lost our passion to win.  Far too many employees are  "phoning" it in, lacking the passion and commitment to be part of  the solution.  We sit idly by while -- at all levels -- employees  are enabled to "hang around".  Where is the accountability?  ... As  a result, employees that we really need to stay (leaders,  risk-takers, innovators, passionate) become discouraged and leave.  ...

  If we get back up, embrace dramatic change, we will win. ...

1.  Focus the vision.  We need to boldly declare what we are and  what we are not. ... We can't simply ask each BU to figure out what  they should stop doing.  ... The direction needs to come decisively  from the top.  We need to place our bets and not second guess.  ...  We need to make the tough decisions, articulate them and stick with  them -- acknowledging that some people ... will not like it.  Change  is hard.
2.  Restore accountability and clarity of ownership.  Existing  business owneres must be held accountable for where we find  ourselves today -- heads must roll.  ... We must redesign our  performance and incentive systems.  I believe there are too many BU  leaders who have gotten away with unacceptable results and worse --  unacceptable leadership.  ... We must signal to both the employees  and to our shareholders that we will hold those leaders (ourselves)  accountable and implement change.  ... It must be very clear to  everyone in the organization who is empowered to make a decision and  ownership must be transparent.  With that empowerment comes  increased accountability -- leaders make decisions, the rest of the  company supports thosse decisions, and the leaders ultimately  live/die by the results of those decisions.  My view is that far too  often our compensation and rewards are just spreading more peanut  butter.  We need to be much more aggressive about performance based  compensation.  This will only help accelerate our ability to weed  out our lowest performers and better reward our hungry, motivated  and productive employees.

3.  Execute a radical reorganization.
  The current business unit  structure must go away.  We must dramatically decentralize and  eliminate as much of the matrix as possible.  ... I emphatically  believe we simply must eliminate the reduncancies we have created  and the first step in doing this is by restructuring the  organization.  We can be more efficient with fewer people and we can  get more done, more quickly.  We need to return decision-making to a  new set of business units and their leadership.  But we can't  achieve this with baby step changes.  We need to fundamentally  rethink how we organize to win.  ... two key principles must be  represented:
Blow up the matrix.  Empower a new generation and ... leave no doubt about where accountability lies.

Kill the redundancies.  Align a new set of BUs so that they are not competing against each other.
I don't pretend that I have the only available answers, but we need  to get a discussion going; change is needed and it is needed soon.   We can be a stronger and faster company -- a company with a clearer  vision and clearer ownership and clearer accountability. ... I don't  pretend this will be easy.  It will take courage, conviction,  insight and tremendous commitment.  I very much look forward to the  challenge.  So let's get back up.  Catch the balls.  And stop eating  peanut butter.

Is this executive describing your company?  Does your company suffer from uncommunicative--or even competing--silos, excess bureaucracy, decision by committee, and a lack of passion to win?  Are responsibility, authority, and accountability misaligned?  Does incentive compensation reward those playing to win, or only those who are playing not to lose?  If so, then perhaps some of the organizational fixes proposed (or declared) by Mr. Garlinghouse might be worth considering.

Suppose you were to "blow up" your management matrix?  What might the next generation management structure look like?  Would decision-making be pushed down to program managers, who would be the mini-CEOs of their program fiefdoms?  Or would you create program portfolios, with support matrixed to the programs only for a relatively limited organizational subset?  If you had a blank sheet of paper, what org chart would you create?
Radical Reorganization
There may be no "correct" answer to the foregoing questions.  But we know from experience that organizational silos are the bane of effective and efficient leadership.  Moreover, where silos exist, the spaces between the silos are "no-man's lands" of ambiguity and non-accountability, where nobody takes responsibility because decision-making authority is unclear.  Time after time, we have seen the distance between the silos--measured in terms of geography, job function/title, and hierarchy--defeat the best management intentions.

Consider Mr. Garlinghouse's call to action.  Is he calling to you?


Effective January 1, 2019, Nick Sanders has been named as Editor of two reference books published by LexisNexis. The first book is Matthew Bender’s Accounting for Government Contracts: The Federal Acquisition Regulation. The second book is Matthew Bender’s Accounting for Government Contracts: The Cost Accounting Standards. Nick replaces Darrell Oyer, who has edited those books for many years.