Making Complex Organizations Work

Making Complex Organizations WorkThe challenge of today’s increasingly complex organizations is captured very well in a December 2004 article in Harvard Business Review featuring an interview with Sam Palmisano, then CEO of IBM. http://hbr.org/2004/12/leading-change-when-business-is-good/ar/1. He talked about 100,000 cells in IBM – “Think of our organizational matrix. Remember, we operate in 170 countries. To keep it simple, let’s say we have 60 or 70 major product lines. We have more than a dozen customer segments. Well, if you mapped out the entire 3-D matrix, you’d get more than 100,000 cells—cells in which you have to close out P&Ls every day, make decisions, allocate resources, make trade-offs. You’ll drive people crazy trying to centrally manage every one of those intersections.”

Command and Control?So this is a strong argument against using a command and control hierarchical structure in the 21st Century unless you have a very simple product, an uncomplicated customer delivery process and a very straight forward and stable marketplace.

WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF COMPLEX OR MATRIX STRUCTURES?

AdvantagesHere is what we have identified as the advantages of a matrix organization based on our work with leaders in a number of international organizations.• Common and clear processes across the business• Flexible and agile• Networking and information sharing - Cross boundary working, sharing, trading, sharing, of

ideas• Local decisions can be fast - much more focused and faster responding to customers in

business area countries• More resource to call upon and more effective resource utilisation – decision process quicker• Less egocentric and dependent on one or few individuals and their preferences• Better communication –

– Two way communication so better understanding– Sharing experience and knowledge– Not only up and down but sideways

• Less silo thinking - People working cross functional and regional boundaries• Commitment – shared ownership• Team spirit is higher - people are more informed - people working for many bosses and the

result is normally better• More career opportunities within the organisation

DisadvantagesLike most things in life there is also a downside and things that are not so advantageous about complex organization working. • Corporate decision making can be slow or a problem as the way to make the decision

and the decision making process may be slow or unknown to many of the stakeholders• Conflict of priorities - which task should we move on first• Conflict between people – an interpersonal conflict generating a breakdown or

restriction of organizational communication and decision-making• Maybe a single boss focus may colour priorities - which boss do we like the most rather

than what is important to get done• Management ambiguity – the environment is grey and fluid – which individual(s) or

stakeholder(s) are key to moving the task, project or issue forward may be unclear - you have to be able to live and function in this type of environment

• Conflict in power - individuals using their power to promote only their own objectives or seeing power as important for their personal status

• Communication challenges – who needs to know and how much do they need to know?

SO HOW MIGHT WE TACKLE SOME OF THESE DISADVANTAGES OR ISSUES IN OUR COMPLEX ORGANISATION?

Making it workWhat is critical for making any complex organisation work are individual accountability, shared values and way of working, shared processes, and opportunities for understanding and knowing your key stakeholders.

Making it work - 11. Communication, language and cultural barriers

– Hold formal networking events and functional meetings – Establish a common language and understanding of meanings of words– Establish common processes and operating systems – Establish common values interpreted correctly locally– Have a good information system

2. Conflicting objectives, priorities and time lines, unclear roles and responsibilities– Establish clear roles and responsibilities – make it clear who is responsible for what in

which situation – provide a set of guidelines– Establish leadership operating principles– Implement common values– Adjust measurements – KPI’s, etc. – to minimise conflict– Establish networking and networks and opportunities for people to network– Adjust processes to minimise potential for conflict

Making it work - 23. Multiple owners of a problem which slows the solution down

– Establish clarity of process definition/map and KPI’s– Install clear goals and targets for actions that are taken– Establish high level strategies and roadmaps– Skill employees in good social and emotional intelligence– Establish common values

4. Bureaucratic behaviour – how to avoid ending up with mediocrity in everything– Implement common values that are lived– Delegate more decision power to the people– Establish boundaries – what kind of decisions you are allowed to make – Build an atmosphere of trust– Establish common well defined processes– Develop interpersonal skills to be able to negotiate and influence ethically and

professionally– Enable knowledge sharing to be able to exchange

Making it work - 35. Pushes to compromise – if the compromise is not in the best interests of

the business of the corporation– Develop and educate people to manage conflict – educate in conflict resolution

skills– Ensure understanding of corporate priorities and objectives– Establish a clear process for ensuring the corporate interests are fully considered– Hold individuals accountable for corporate success as well as their own individual

unit’s success 6. Insecurity and stress due to multiple bosses

– Implement a common set of values and leadership behaviours that leaders are held accountable for demonstrating

– Build trust– Skill leaders and employees in emotional intelligence– Skill leaders and employees in transactional analysis in order to promote adult

conversations and ways of dealing with issues

Making it work - 47. Avoiding hiders having a place to hide – individuals who use the system

to avoid taking responsibility and action– Clear targets and measurements for every single person – Enable and

ensure that all bosses does know and understand what their employee do and what value they contribute

– Establish an appropriate culture and values– Make all individuals accountable – what have they delivered against

their role

ABB Example - 1• ABB was for many years used as the illustration of how a complex

matrix structure can be made to work. How did they make it work?

• The company was organized into 1300 companies divided into 5000 profit centres with a maximum of 50 people. You can avail of the muscle of a big company but with a strong entrepreneurial, local approach. The business area heads were on the boards of the top companies. So they helped the company heads to develop their strategies. It was divided into regions. The country managers were responsible for profit. Business area heads were responsible for developing the business area.

ABB Example - 21. They had devices for fostering group unity:

– A set of core values providing a sense of belonging to one organization– A clearly articulated definition of the leadership behaviour we want in ABB

2. Mechanisms to foster cross border understanding and cooperation.3. Short lines of communication4. Creating a matrix mind set in the minds of managers with a set of

principles to support it. For example mutual adjustment. Conflict should be resolved at the level at which it arises. If you escalate a problem more than once both parties to the conflict will be fired.

5. Developing global minded leaders.6. Creating global connection at the top.