Organizational Change

Company X is an online advertising company based in NYC. Founded in 2004, the company was started by 2 co-founders, CEO and President. The company experienced extraordinary growth within the first three years, but by end of year 4, the company’s revenue stagnated. The firm, however, continued to hire (20% increase) between years 4 and 5. In fact, the company was growing faster than they could handle. The organizational structure was a flat hierarchy. Upper management consisted of the two co-founders, and CTO. The organizational makeup was such that the CEO was in charge of the sales, production and marketing, and the President headed accounting and technology. Everyone reported directly to the two leaders who were viewed at the same level. There was no organizational chart and everyone’s role was more than just one role. There was a lot of overlap. The marketing manager was also involved in production and helped with product development. The accounting department was also the HR department. The business was very unstructured and it didn’t have a long-term strategy in place.

By 2009, the company was losing money on a monthly basis. The CEO and President each had differing visions. The President wanted to start raising more capital but it would be difficult to get investors on board unless they could prove that the company was growing. He recognized that the company’s problem was not an organizational problem just because they had too many people, but rather a function of broken checks and balances and lack of internal processes and accountability. So, he created a sense of urgency around a need for change by talking to upper management and the 5 board of directors. (Step 1 – Creating Urgency Kotter says that for change to happen, it helps to get the entire company to buy-in.) The CEO was opposed to restructuring the company. He wanted to focus on maximizing the existing customer base rather than grow the client services arm of the company. Due...