So many ways to fall into The Big Rut

Oct 21, 2011
The Big Rut

A number of press pieces in recent weeks have provided a fascinating case study in just how close to impossible it is to get out of The Big Rutonce you’ve slid into it. Read and be forewarned:

1. You can’t graft a Visionary into The Big Rut

Japanese camera maker Olympus [TYO: 7733] fired their recently-appointed CEO for being too radical. Get this:

“[Olympus…] indicated that Mr. Woodford had gone too far…Mr. Woodford would often bypass the heads of company divisions to give orders directly to the rank and file.”

Sounds like a Visionary to me…and shows:

(a) That you can’t get out of The Big Rut simply by parachuting in a Visionary – the body will always reject the organ (Harvard University paging Dr Summers…), and

(b) What a great job of tightrope-walking Howard stringer has been doing over at Sony [TYO: 6758 NYSE: SNE].

2. The only way to resuscitate an entity in The Big Rut is to entirely remove the senior leadership.

When I share the Predictable Success model with groups, there’s one question I can guarantee will be asked:

“Isn’t there any way back from The Big Rut?” (Usually asked by a worried employee of an organization deep in it.)

And my answer, based on experience, is always the same:

“Only if you remove the senior leadership – 100%. With a complete and utter clear-out you might stand a chance of recovery – without it, you definitely won’t.”

Watching the almost-but-not-quite-yet overthrow of the Kadafi regime in Libya is a chilling reminder that the Predictable Success methodology applies to any enterprise, not just businesses, and overthrowing a regime in The Big Rut requires just as comprehensive an approach as rescuing a business.

Either you get everyone from the old regime out, or you face the constant threat of an insurgency.

It also confirms why I fear that any talk of a recovery by General Motors [NYSE: GM] is premature – they were deep in The Big Rut before the bailout, and while they received considerable funding, most of the senior management is still in place…

3. Culture can drag you into The Big Rut

Finally, it’s interesting to note that it isn’t just a lack of entrepreneurial spirit that can pull an organization into The Big Rut – a crappy culture can do it just as effectively.

Case in point: News Corporation [NASDAQ: NWS, NWSA ASX: NWS] which was doing very nicely, thank you, for many years – and which, solely from a financial point of view, was definitely in Predictable Success for a time.

After almost a year of scandal and negative reporting: phone hacking, predatory marketing practices and now, allegedly fiddling circulation figures it’s obvious that their inward-looking, ‘circle-the-wagons’ culture has precipitated an accelerated decline into The Big Rut.

Watch for the classic signs of what will be an ultimately fruitless attempt to reverse the decline: spin-offs in an attempt to rescue the umbrella conglomerate, board-level defections, family members sacrificed to assuage opinion, and finally, a wholesale break-up and/or sale of the underlying business.

Crappy culture = bad karma = The Big Rut. Be warned.