You may have heard this anecdote before, I was told it by a CEO who said it was a true story.  It presents an interesting perspective on when and why to undertake radical changes in your business.

When first appointed, the CEO who told me this story was given three envelopes by his successor.  He was advised to do the best he could but when the wolves were at his door and trouble in the wind the information in the envelope would help.

Envelope #1

His first couple of years went well but by the third fiscal year expenses were up and revenues flagging.  He opened the first envelope.

It said ” Give the stakeholders something to take their minds off the state of the business, implement a company-wide process improvement program.

He did this and the problems magically went away (at least the perception of them).

Envelope #2

After a couple of smooth years, the overall economy flagged and things in the business we again on a downward trend.  He decided to open the second envelope.

It said “Give the stakeholders something to take their minds off the economy.  Implement a company-wide restructuring.

He did this and the problems magically went away (at least the perception of them).

Envelope #3

After another couple of smooth years business problems were back.  The expense trend was on the rise, revenues were down.  Seemed like time to open the last envelope.

It said “ Prepare three envelopes for your successor”.

And the morale to the story is smoke and mirrors will work for a while but unless the root cause is addressed it will catch up with you eventually.

In large organizations, reorganization and process redesign can be a great way of deflecting stakeholders temporarily but ultimately the real issue will need to be resolved.