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Fortnightly Magazine - September 15 1996

have faded away.

Not Smart Enough by Half

A company destined for homicide resembles its aged counterpart, with the difference that it realizes the need for change. As a result, it keeps revamping its organization charts and cutting large numbers of employees at once. It may discard unsuccessful attempts at being competitive by selling those parts of the company. It may acquire other companies with the mistaken idea that sheer size provides protection from competition and/or makes it more efficient.

Nevertheless, this company still does the same things the same way (em just with a new structure and fewer people. Where individual employees prove exceptional and enjoy the freedom to act relatively independently, such a company may avert its fate. Unfortunately, the employees of such a "reengineered" organization are most often confused, understaffed, and only motivated to perform the minimum necessary to keep their jobs. They lack a comprehensive plan to follow, or any direction other than improved financial targets. Finances prove disappointing; growth in assets as well as growth in the return on those assets often approach an equal level or worse. Customer service decays. The better employees flee to companies with better atmospheres.

When reengineering falls short of its touted potential, a surprised management regroups, and a few years later the need to reengineer resurfaces. (Will "rereengineer" become the new buzzword?) Amidst the turmoil of this weak moment, either the board of directors will oust company management, or an outsider will acquire the company from grateful shareholders.

Rising to the Situation

The future need not prove so bleak, however. A company that approaches change proactively and positively can find itself "born again." Such a company honestly diagnoses its situation and the tools at hand. It then determines how best to employ its strengths and mitigate its weaknesses.

Such a company gives its workforce a comprehensible plan that focuses on realistic, coordinated objectives. Everyone pulls in the same direction. Necessary reductions in personnel are viewed as part of the plan, not as a periodic episode of stockholder appeasement. Innovative applications of company strengths stimulate growth and present more opportunities. The company improves customer service while reducing costs. Employees want to belong to the organization, and turnover decreases. Finances constantly improve. Stockholders reward the

company with a higher multiple. The company surveys weaker companies in its industry, looking to acquire and then improve their performance. The company thrives by discarding the utility mentality in favor of enlightened management.

As most readers might imagine, the "born again" companies form a rare minority (em the long-term survivors of the utility industry. But rarer still will be companies that age gracefully into competitive entities. Shareholders or competitors are unlikely to leave potential unrealized for long.

Quite possibly, the future holds utility service suppliers but no utility companies. Only those companies able to think and act "out of the box" will thrive in the even more competitive environment of the future. As in the jungle, strong companies will become the predators, while the aged and weak fall prey. t

Jack Reinhard runs a strategic planning and