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A need for self-surgery

May 24, 2015

25 years ago, management guru Gary Hamel was telling CEOs about the need for self-surgery. Facing the chill winds of globalization, he explained their need to urgently reassess many of the structures and policies that had come with their former greatness. Among these were the need to rethink the management systems that had been fundamental to their success, such as operating with multiple profit centers and promising ’employment for life’. Practices like these stood in the way of lean, efficient operations and collaborative, skill-based delivery systems. They faced the choice of self-surgery or the mortician – and in the subsequent 25 years, more than half the Fortune 500 have disappeared or left the list.

Those businesses that have survived did indeed engage in self-inflicted bloodbaths. They cut non-core operations; they slashed established head count; they outsourced a myriad of functions; they automated, standardized and maximized operational efficiency. They re-thought products and services, often transitioning their core market value proposition.

As part of this process, many internal functions grew in stature and were centralized, partly to increase efficiency, partly to develop new global capability and partly to embed central controls. Legal, Procurement and Contract Management are all examples of this. And now it is time for them to engage in their own self-surgery, to enable yet another new era.

Globalization happened. It brought many changes to the way we do business. The administration of sprawling operations demanded increased controls and compliance. It created a wave of price-based opportunities, driving commoditization. It required worldwide knowledge and intelligence to take advantage of local market opportunities, cheap labor and new ideas. But now, those attributes are not enough – and many of them either get in the way or can be automated. So Legal, Procurement and Contract Management must adjust – or be adjusted!

What needs to change? High on the list are purpose, skills and technology. First of all, these groups must stop believing they are special, that they (or their business) is in some way unique. ‘Being special’ is an attribute that arises from the outside looking in, not the inside looking out. So these functions must focus on issues such as how they enable the speed, flexibility and commercial creativity needed for a digital age; how do they empower good decision-making; how do they acquire and distribute the knowledge needed for good judgment and to support differentiated products or services? The purpose of these groups must be to establish competitiveness – which means operational excellence, intimacy in relevant trading relationships and commercial innovation. The changes involve discarding old, risk averse contracting models and moving to relational structures; creating contracts designed for users, not for courtrooms; changing measurement systems to monitor outcomes; discarding redundant technology and embracing the collaborative, performance-enabling tools of today; welcoming accountability for results and ending the culture of isolation, blame or powerlessness. They need to undertake honest, objective appraisals of their existing process, skills and tools – have the courage to benchmark and to confront the steps needed to be among the best.

A new world is upon us. As someone observed last week ‘We are working in an environment where the speed of change is unprecedented. And it will never be this slow again.’

Are you ready for self-surgery?

 

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