Not Understanding Changing Objectives in an Enterprise Leads to Failure

All too often, we see organizations where the original objectives have been forgotten.

Not Understanding Changing Objectives in an Enterprise Leads to Failure image RG Multiple directionsNot Understanding Changing Objectives in an Enterprise Leads to FailureAs a result, many things that had good reason when they were set-up have become incomprehensible.  A huge example of this is the US Postal Service.  It is the only business named in the Constitution. It was created as a public service, much like the Army or Federal Reserve but to tie the nation together with communications and information.  This is why First Class postage is still so cheap (much less than in any other country, and who else can take a letter from your mailbox to a precise mailbox across the country in a matter of days), and newspapers and magazines get preferential rates.  As it was not set up as a profit making enterprise, it was not structured as one but to meet the objectives set in the Constitution.  Then in 1970, Congress decided to spin it off and force it to be profitable while still meeting the constitutional objectives.

However, many of the things it would need to do to be profitable, things that Canada Post or Deutsche Post have done, would require a constitutional amendment to allow.  Thus the US Post Office has two conflicting objectives.  It would be as though we suddenly demanded that the Army start making a profit by charging voters market rates for its services on an á la carte basis!  Many of the changes needed to make it profitable would require a Constitutional amendment.

Another example of shifting objectives is US health insurance.  The US is the only country where the bulk of people get their healthcare costs covered by employer paid insurance.  It came about through an accident of history. During WWII, a wage and price freeze was put into effect.  Yet employees still agitated for more pay (yes, there were even strikes that harmed the war effort), so employers started to initiate health insurance through newly set up non-profit insurance co-ops.  These organizations were charged with putting the patient first and to make no profit. During the 1950s, there was a huge expansion of this as health insurance payments became non taxable to the employee while deductible to the employer.

As medical technology advanced, costs rose and employers had a more distant relationship with insurers, whose managers began to see themselves as also being corporate executives, just like those they served.  Over time, most turned themselves into for profit corporations and their objectives changed.  Kaiser Permanente is the largest healthcare insurer that remains true to its original objectives and is named after its early sponsor during WWII, the Kaiser Shipbuilding Company.  Interestingly, it is much like the single payer systems in other countries, and with 8.9 million members, is larger than many.

These two fairly dramatic changes are not the only examples.  Utilities have all seen changes in objectives.  ENRON was the best known example of a sleepy company that aggressively embraced changing objectives.  It did so to an extent that sensible controls were completely lacking.  Many other businesses or nonprofits have experienced wrenching changes in their objectives.  For example, when joint stock limited liability companies were first allowed in mid-18th century Scotland, employing people was a clear objective, created in exchange for allowing investors to make greater returns, that has diminished in importance.

As Marketers and Business people, while we are not forced to hold to earlier objectives, it is smart to know them.  “Form follows function,” so organizations are designed to achieve objectives, and, if these change, the organization may be ill-suited to them.  Furthermore, there will be many people within the organization who will resist change and will feel compelled to keep meeting the old business objectives.  Are the objectives of the Post Office still to deliver all mail, six days a week to any address in the US at a very low price, whatever the cost?

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