'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
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.
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:
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
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
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
'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
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
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
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
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
RESTRUCTURING MEANS DRASTIC CHANGES?
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
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
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
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:
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
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
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
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
Specifically, the company's Transvaal and Orange Free State divisions have
merged to form a single inland division as part of a comprehensive
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.
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
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.
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 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.
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
In the company's planned new structure, individuals will
become generalists, not specialists, to generate flexibility
through participative empowerment, multi-skilling and cross-
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
Management structure was flattened and geared to
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.
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.