Do we have the right number of people and is our structure cost-effective?”, “Are we properly organized and aligned to execute our strategy across geographic borders?”, “Do we have the right balance of global scale and local responsiveness?”
These are some of the questions more and more senior executives in Indian organizations are asking themselves as businesses try to balance the need to manage with the need to build for tomorrow. The global recession and slowing international demand has led some companies to undertake significant restructuring, while others are capitalizing on the opportunities for acquisitions and new alliances. In both these contexts, organization design has become more important than ever.
Illustration: Jayachandran / Mint
The definition of organization design, unfortunately for most, is limited to the “boxes” and “lines” called organization charts. Rarely are such charts reflective of the way work really gets done or how decisions are made. An organization’s design evolves in fits and starts, often shaped more by politics than by policies.
Although most executives know when their organization designs are not working well, few possess a practical and simple framework for making improvements.
An organization design should be viewed as the glue that binds business strategy with technology and business processes (see Building blocks). And crucially, the design must factor in the desired culture and leadership capabilities. Viewed together, these levers provide a more holistic, actionable definition of organization design.
Many Indian organizations have grown to become multinational corporations over the last decade. Yet, being a truly global organization isn’t easy. In the past, the prescription for going global was relatively straightforward: Grow from a solid foundation in one’s home country and replicate well-established rules and processes across a larger geographic area, adapt to local conditions but resolve conflicts in favour of the home-office culture and reduce complexity by maintaining a relatively homogeneous leadership team.
More recently, however, the playing field has changed. Competition in many industries is now truly global—with leading players emerging from all corners of hitherto developing countries. Consider information technology, or IT, service providers and automotive challengers from India, electronics giants from Korea and state-led natural resource behemoths from China, all of which make for a far more complex business landscape. An effective global operating model, the means by which executives coordinate a corporate centre with geographic units as they pursue international growth, is critical to successful growth in today’s world. Sounds easy, yet companies from developed and developing economies alike find it challenging to create the right combination of global coordination and local responsiveness.
A leading Indian telecommunications giant identified a few unique principles that underpin its global success. The first is an emphasis on harmonization over standardization. Harmonization consists of a framework of simple rules about which processes, technologies and metrics should be local, regional or global. Harmonization does not necessarily mean that standards are based on home country practices. It is entirely possible that the best processes, technologies or metrics may emerge from the company’s foreign operations.
The second principle is distributed leadership. There is no real headquarters; high-profile leaders collaborate from different places around the globe. The top 50 executives in the business are distributed across 12 international cities. And less than one-third of them are from the home country. The dispersed nature of the top team, however, doesn’t slow the company. The team can get together at 10 minutes notice on the phone wherever it is to make decisions.
An emerging view today is that hierarchical structures of reporting relationships offer only a partial view as to how an organization functions. Organizations are complex networks defined by a web of interconnecting relationships that affect reporting, influence, information flow and collaboration among people at all levels. Applying network theory techniques, one can map the informal structure and see how decisions actually get taken, how they are sometimes blocked, how improved collaboration can emerge, and how sometimes, very key “connecting” roles can be played by people lower down in the hierarchical structure.
It is pertinent to note that many a time, senior leaders use restructuring as a cure for all maladies, often to pursue personal agendas. This should be cautioned against. While organization design can be used as a potent tool for unlocking value, the objectives for any organization design exercise should be clearly spelt out. Structural changes are time-consuming and often disruptive to organizational activities, and new structures often create new organizational problems that are as troublesome as the ones they try to solve. Organizations also run the risk of losing a great deal of tacit knowledge in the process.
Hence an objective assessment of the need for organizational design interventions is of the utmost importance. In the final reckoning, a holistic look at organization design is one of the most potent tools to translate your visions and strategies into reality.
Deepak Malkani is a partner with Accenture India and leads the talent and organization performance practice. Jayesh Pandey leads the organization effectiveness practice in Accenture India. Both are based in the firm’s Mumbai office.