Business Exposed186
change: (1) breaking escalated power distributions before it is too
late, and (2) increasing a rm’s capacity for change.
Different people and departments have different levels of power
in every organization. And there is nothing wrong with that;
there is an optimal allocation of power. However, as we know
from research, power tends to accrue to people who already
have it. Thus, power can get out of hand, beyond what is
optimal! What I have noticed several successful companies and
CEOs do is to alter such power structures before it is too late.
They reorganize their companies before the power distribution
becomes too skewed.
Furthermore, what we also know from research (but I am sure
you may have experienced it yourself) is that, over time, rms
gradually become a bit rigid and inert. Organizations, like people,
get set in their ways. Altering the rm every now and then,
through a reorganization, will restore a rm’s general adaptability
and capacity to generate and deal with change, which is key to
success and even survival in many businesses.
But of course, notwithstanding the above, I recognize that there
is a balance to be struck; you can also do too much of it. It is just
that now, the predominant attitude seems to be to not change
unless you really have to. I am just putting the burden of proof
the other way around: change unless you have really good reasons
not to, because there is value in the process of reorganizing.
“A serial changer”
In the process of learning about organizations and the benets
of regular reorganizations, I interviewed a guy called Al West.
And Al is quite a guy. Not only because he is the founder and
CEO of SEI, an investment services rm headquartered in Oaks,
Pennsylvania, which has consistently showed earnings growth of
40 percent per year, but because of the way he runs his company.
For example, I asked for the contact details of his secretary to put
an appointment in the diary. He doesn’t have a secretary. Actually,
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Making far-reaching decisions
he doesn’t even have an ofce. And when I went to his London
ofce to speak to him, reported at reception, and asked for Al
West, the lady behind the desk said, “Who? Al West you say?
Let me see if we have anyone in this company by that name.” Al
didn’t strike me as the stereotypical autocratic, macho CEO.
What Al did strike me as – and which is the reason why I
wanted to talk to him – is a “serial changer”; or at least that is
how one of his employees described him to me. He is altering
his organization – in terms of its structure, incentive systems,
decision-making procedures, etc. – all the time, never quite
satised and never quite done. And somehow, I suspect that is
part of the key to his company’s success.
In 1990, Al broke his leg in a skiing accident. He lay in the hospital
staring at the ceiling for about three months. When he came
back to work, despite the company growing and performing well,
the rst thing he did was to completely reorganize the entire
rm. His employees thought, “Why change a winning formula?
He must have been quite bored and couldn’t think of anything
better to do. I am sure it will pass.” But it didn’t pass. Ever since,
Al has been reorganizing his company regularly.
And he does it because he doesn’t want to allow his organization
to become settled and “comfortable”. SEI has been growing
steadily for decades now, with an impressive – and impressively
stable – 40 percent per year. Yet, Al never does any acquisitions
(he feels they would disrupt the smoothly running organi-
zation). Unlike many other successful companies, SEI doesn’t get
trapped in its own success and gradually grow rigid and inert; SEI
continues to innovate and grow.
The reason why many very successful companies nd themselves
in trouble in the long run is that they become too insular,
narrow, and set in their ways. This leads to problems when
their environment changes. Yet, Al’s regular changes to his
organization prevent it from becoming set in its ways. Moreover,
powerful people and groups within an organization usually, over
time, become even more powerful (because they can get their
hands on even more resources, budget, and people): too powerful
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