'Management believes that it can only create the right customer-service environment with the right people and the right systems in the right structures.'
- John Jessup, marketing director, Nissan

'CHANGE'. It's a word that scares the hell out of executives cast in the traditional mould. It rocks the boat of mediocrity. It often spells death to management structures that have survived far beyond their useful lives.

When confronted by change, a lot of executives - especially those in middle management, who suddenly find their services dispensable - look the other way and pray for it to go away.

But change in management style is overdue for those in South Africa who found themselves in business during the country's long period of protectionism ... when the way we did business under the yoke of apartheid seemed cast in stone. When it seemed that nothing could silence the clang of busy cash registers.

And now that sanctions have gone, the demand for change has intensified in step with the rising threat of foreign competition.

So ...


WHAT DOES 'CHANGE' MEAN?

It means drastically redesigning your management structure to be more cost-effective, more efficient and more responsive to market fluctuations. This, in turn, could mean:

  • downsizing;

  • re-engineering;

  • flattening or de-layering, and

  • delegating.

Or a combination of all four.

No matter how hard you try, you can't sweep change under the carpet. So, in most companies, you may as well resign yourself to the fact that you're going to have to face it. Sooner rather than later.

Some companies, of course, will ignore the challenge of change. Although they make reassuring noises about their ability to fend off, if not smother foreign usurpers, the die- hards will probably make the softest targets.

The traditional organisation structure is centralised and vertical, sometimes referred to as 'top-down' or 'vertically integrated'.


Decisions from the top

Slavepak Holdings, which manufactures the Bantex range of filing systems and general office stationery, claims the system works well for it. All decisions come from the top and are relayed downwards.

The company is organised along divisional lines. Each division has a specific function. This effectively isolates employees in particular jobs and offers no opportunities for multi-skilling.


Private sector bureaucracy

National Sorghum Breweries adopts an almost identical management philosophy. It's a private sector bureaucracy in which power is concentrated at boardroom level.

A glance at the company's annual report can be misleading. There appear to be 18 strategic business units.

It looks impressive.

But unit managers have very little power. This often leads to problems because of the time it takes to get a request through to the chairman and receive his response.


Vertical management 'strength'

Jet sees its present vertical management structure as its strength.

'Our structure fits our strategy,' says Sandy Barnes, 'and we see no need to change it. Let me put it this way: why would we in difficult times remove or change the very blocks that built the company and made it what it is today - a prosperous, profitable retail chain in a highly competitive market?' 

Jet operates with a traditional, top-down, centralised management structure. Each branch has a store manager. Branches in the same area are grouped together under an area manager. Several areas are grouped into a region under the control of a regional manager. A number of regions are grouped in an operating division overseen by a divisional manager.

These managers have very little autonomy. Most decisions are made at headquarters.

New management wisdom, particularly in the United States, condemns the traditional structures as anti-conducive to quick decisions in the field.

So, if you want to stay in the race ...


FLATTEN YOUR DECISION-MAKING ROUTE

Like Nissan which, until recently, relied on a traditional hierarchical management structure. But things changed when those at boardroom level saw the need to make those working downstream more accountable.

The company adopted an 'amoeba structure' - a structure that eliminated middle management. All employees received strong signals that individuals would be held responsible for specifically designated tasks.

Restructuring also led to head office granting more power and autonomy to regional offices, each of which now has its own marketing manager.

In terms of the new dispensation, regional managers no longer merely take orders. They have the responsibility of actively developing dealers' businesses.

Job titles have also been changed to reflect the objectives of people in particular positions. Brand managers, for instance, assume the responsibility for specific vehicle models and strive to enhance the brand equity of that vehicle.

The primary reason for changes in the management structure was to create an environment conducive to the production of 'superior customer service'.

In the past, the Service Division was technically focused. This division has been renamed. It is now called the Customer Satisfaction Division to reflect Nissan's new consumer-focused philosophy.

So ...


HOW DO YOU RE-ENGINEER YOUR MANAGEMENT STRUCTURE?

You decentralise control, cut out middle management and delegate authority. Like Lindsay Saker.

In the past, the company's management hierarchy had four levels:

  1. Branch manager.

  2. Regional manager.

  3. Operations director.

  4. Managing director.

Now branch managers, empowered to make on-the-spot decisions, report directly to the managing director. Cutting out the go-betweens speeds up communication and decision- making.

Restructuring also gave birth to separate, decentralised business units. For example, each branch has its own financial manager and debtors clerk.

Although this move achieved very little measurable saving compared to savings achieved by reducing the complement of middle managers, it led to quicker responses to market fluctuations and higher levels of customer service.

So ...


RESTRUCTURING MEANS DRASTIC CHANGES?

Not necessarily.

If your management organisation is already flat and streamlined, you may not have to do anything. A case in point: Standard Bank.

The bank doesn't contemplate any changes to its management structure, although its strategists proclaim: 'The threat of offshore competition isn't a threat. It's a fact.'

Standard's existing structure has already been designed to operate in an environment filled with foreign banks.

At last count, 37 of them had established themselves in South Africa, among them Société Generale Paris, Bank of Taiwan, The Union Banque Suisse, Crédit Suisse and the Deutsche Bank.


Manipulating vs restructuring

To get into fighting trim, other corporate management structures require to be only gently honed.

For example, ABSA has reacted to possible competition from foreign banks by 'manipulating' rather than restructuring its organisation.

Motivation for the changes stemmed from a management desire to understand clients' needs and to establish whether the banking group had the resources to give clients what they wanted.

Management also had to determine whether it was profitable to give clients the services they wanted.

The changes, currently in the implementation stage, streamline ABSA's decision-making structure by establishing six senior committee groups. 

Each group, which reports to the chief executive, focuses on a specific operational area. The areas are:

  • asset liability management;

  • information technology;

  • sales and marketing;

  • operations;

  • human resources, and

  • credit.

A special task force, Project Dynamo, generated the structural re-engineering operations. Its brief: to investigate ways of increasing productivity and efficiency by the cost-efficient use of resources, including information technology.

The overall aim of the project: to move people from the back office to the front office and create more revenue- generating sales staff by slimming the group's administrative complement.


Continual performance assessment

Another company that doesn't feel any need for drastic change is the Beer Division of The South African Breweries. Although it hasn't faced any serious competition from international brewers since 1979, the company continually assesses its management performance and addresses problem areas as they come to light.

While SAB keeps in constant touch with developments abroad, it has its own ideas of how the Beer Division should be structured. For example, it recently introduced a new integrated management process. This gives each employee a greater responsibility for his own job. And this, in turn, leads to better customer service.

But if your management style is autocratic ...


YOU MAY NEED TO MAKE FAR-REACHING CHANGES

Coca-Cola bottler and marketer ABI, faced by the re-entry into the South African market of international arch rival Pepsi-Cola and increasing competition by store brand colas, has taken a long, hard look at its traditional style of management.

The autocratic, top-down style of management is giving way to participative management. This is human-centred and strongly based on the participation of employees in management and the understanding and co-operation of labour unions.

ABI has also adopted the concept of Ubuntu, which deals with the issue of addressing employees in an appropriate manner -  in a manner that demonstrates management's appreciation of employee input and 'makes them feel part of the ABI family'.

And if you want to cut costs ...


TRIM FROM THE TOP

Re-engineering at Simba has focused on cost reduction. The company's 'restructuring and development phase' reduced the number of directors on the board.

And 'quite a few retrenchments' followed slimming exercises further down the hierarchical line.

Specifically, the company's Transvaal and Orange Free State divisions have merged to form a single inland division as part of a comprehensive cost-saving programme.

In addition, the introduction of a 'strategic task- orientation' concept has shortened the span of control by shedding a layer of sales management. The objective: to speed up effective decision-making.

So ...


YOU MUST RESTRUCTURE TO SURVIVE

Maybe. But maybe not.

'Restructure', 're-engineer', 'downsizing' and 'outsourcing' are buzzwords for new management philosophies that are sweeping through American and European boardrooms.

Enthusiastic implementation has sometimes worked wonders. But often the results have been disastrous.

Ostensibly designed to improve flexibility and communications, accelerate decision-making processes and enhance customer service, many organisational restructuring programmes serve only to increase the number of companies filing for bankruptcy and the length of unemployment queues.

Therefore ... 


THINK BEFORE YOU ACT

 What corporations - particularly multinational conglomerates - do in New York, London or Paris may not be right for you. Mondi Paper, for instance, modified management procedures rather than relegate its efficient, smooth-functioning structure to the scrap heap.

'Corporate restructuring is very popular at the moment, especially among big groups like Barlows,' says Mike Stewart. 'But restructuring is by itself not a magic wand.'

He argues that re-engineering structures is not always as successful as its proponents claim. It's a drastic measure that treats the symptoms of corporate failure, not the causes.

By gradually altering the corporate culture towards a more market-orientated way of doing business, Mondi avoided the displacements and pain associated with structural change and, instead, focused on the real problems facing the company in the market.

The development of strategic business unit-type teams, which could focus on specific aspects of marketing strategy and react quickly to problems, paralleled the introduction of Mondi Paper's new corporate outlook.

So ...


WHEN SHOULD YOU CONSIDER RESTRUCTURING?

When market rivals blunt your competitive edge by providing customers with better quality service through faster decision-making, greater flexibility and more empowerment of staff at point of customer contact.

For example, Blue Circle recognised the need to change its organisational structure if it wanted to compete with both current and future challengers.

The company has traditionally been driven by a hierarchical management structure with financial specialists at head office and each regional level. Blue Circle's conventional pyramid structure evolved from thee geographic distribution of the company's many plants, sites and depots. In the pre-sanctions era, foreign competitors all laboured under the burden of similar heavy management structures.

In the company's planned new structure, individuals will become generalists, not specialists, to generate flexibility through participative empowerment, multi-skilling and cross- function interaction.


Vulnerability to foreign competition

Edgars began implementing wide-ranging structural changes to it management organisation in 1984.

Recognising the inevitability of a post-apartheid South Africa vulnerable to foreign competition, the board of Edgars formulated strategic plans to brace themselves for a more competitive market.

  1. Management structure was flattened and geared to rapid decision-making.

  2. Decentralisation and concomitant management flexibility improved financial benefits.

A directive issued by the board to store managers reads: 'This is the value of your budget: determine its allocation.'

The Sandton City branch, for instance, recently held a 'Great Shoe Sale' to improve cash flow and boost stock turnover. It was generated by the initiative, and for the benefit, of only one store.

As a result of their new-found flexibility, stores have become more proactive and attentive to the needs of their customers.


Shunting duties

Adcock Ingram Critical Care plans to exorcise executive layers by shunting middle management duties to supervisors. The object: to make company operations more cost-effective.

But the organisational re-engineering also has political undertones. The company is implementing affirmative action and employee empowerment policies to ensure favourable treatment by future tender boards.

Tender board activity on behalf of state hospitals and clinics currently accounts for about 50% of Adcock Ingram's ethical business.

But be warned. If you restructure for the sake of restructuring, you may restructure yourself out of business.


AND SO TO MARKET ...

Now that you've got your well-oiled management structure in place and functioning smoothly, you need to take your goods to market.

Prev   Next

  Authors Note
    Introduction
     
1. Protection Gets the Bullet
     
2. Perceive the Threat
     
3. Define the 'Get In' Strategy
     
4. A Quick Backward Glance-1
     
5. The Importance of Pricing
     
6. Vital Ingredients: Products and Productivity
     
7. Customer Service: On the Backburner
     
8. A Quick Backward Glance-2
     
9. Preventative Strategies: Price and Service Quality
     
10. Preventative Strategies: The Ramparts of Distribution
     
11. Preventative Strategies: Management - to restructure?
     
12. Preventative Strategies: Market Aggressively to Win
     
13. A Quick Backward Glance-3
     
14. In Conclusion
     
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