Archive for the ‘Organizational Design’ Tag

Organizing for global growth

Management guru Alfred Chandler asserted that business excellence comes about when “structure follows strategy.” Unfortunately, many Canadian firms with global ambitions fail to heed this axiom. In their drive to tackle international markets, they often pay insufficient attention to how certain groups, like marketing, end up being organized and perform their functions. This neglect can kibosh even the boldest plans. Fortunately, managers can fall back on a rich trove of best practices.

Companies go global as part of an organic growth strategy or because of an acquisition. The potential returns are great but so are the risks. Given the high stakes, leaders should tread carefully but not too hesitantly.

Managers need to address three key questions up front:

1. Which organizational model — centralized at the home base or decentralized at the local office — can best deliver the growth plan?

2. What are the tradeoffs between a single, global message/program and more tailored, local campaigns?

3. How do you foster integration, collaboration and sharing of best practices between the different offices and teams?

Addressing these questions will expose latent tensions and implementation issues (and new synergies) between various approaches and groups. The story of how two firms addressed the challenge of going global differently illuminates some best practices and key pitfalls. Lets start with a company that has done it right — Manulife Asset Management, the investment arm of insurance giant, Manulife Financial.

Though a global business, it was not leveraging its international marketing and distribution capabilities to market as a local one. The leadership was looking to drive more cross-pollination of best practices and tools, better servicing of local client needs and more efficient processes and practices. A senior Manulife executive, Anthony Ostler, was brought in to reorganize the entire marketing structure. Some of the major changes included: establishing a centralized CMO office; retuning roles and responsibilities, as well as workflows; and promoting richer communication. After 12 months of transformation, the results were impressive. Lead generation and RFP success rates soared and margins widened while overall marketing spend fell.

What they did right:

  • Collaboratively redefined success and the marketing and change strategy that would deliver it, aligning all teams and offices to that single vision
  • Looked at the business holistically but did not shy away from getting the details right, like refining employee career paths, adjusting metrics and optimizing workflows
  • Adopted a “hub and spoke” model that centralized key activities like strategy and RFP creation and decentralized others like product development and local marketing support.

Ostler believes “Focusing on the client experience helped to guide all the decisions and was critical to success. At the same time, efficiencies could be recognized by globalizing certain aspects and we moved aggressively to do this. This client focus coupled with efficiencies helps the business to grow.”

At the other end of the spectrum is a professional services firm that acquired a successful overseas competitor in order to get a foothold in a market it deemed vital for growth, and to ensure retention of its multinational clients. This was not a hostile takeover and the clients viewed it favourably. However, after 18 months the forecasted revenues were not materializing despite significant marketing investment and considerable head office attention.

What they did wrong:

The new firm was managed in a controlling, overly formal fashion that was at odds with the professional services firm’s more entrepreneurial culture and practices. For example, local marketing programs were abruptly cancelled in order to capture early cost savings. Since both offices shared many of the same clients (often on the same project), the acquiring firm assumed the habits and needs of these clients were similar across geographies. In reality, each client subsidiary acted very differently leading to problems and gaps in service and delivery. Finally, the acquiring firm lacked the stamina to fully integrate many of the systems between the two companies. As a result, they were never able to leverage their important knowledge and human capital management systems and achieve the desired productivity and innovation gains.

Going forward:

Since every situation differs, a “one size fits all” approach in areas like organizational design and sales & marketing planning rarely works. Organizational, channel and program integration is not easy but must be relentlessly pursued in order to maximize program efficiency & effectiveness, minimize internal strife and drive collaboration. Using proven change management tools is critical. At its core, excelling as a global company is about dissimilar people working together. Ignoring the needs and aspirations of your teams will compromise organizational performance and business results.

For more information on our services and work, please visit the Quanta Consulting Inc., web site.

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Guaranteeing integrated marketing

Many marketing departments resemble the Tower of Babel:  disparate teams, speaking different languages, working at cross paths and often not getting along.  In business parlance, this is called an integration problem.  Like the challenges facing the denizens of Babel, poor integration can wreak havoc on a company’s marketing effectiveness and brand image. Luckily, CMOs can overcome these problems by tweaking their structures, processes and practices and driving tighter strategic alignment.

Loose integration occurs when different customer-facing groups (e.g., marketing, sales, customer service) pursue different institutional (or personal) agendas. We have seen the implications of weak integration in dozens of our clients and the firms we benchmark.  Symptoms include: schizophrenic brand messages; tactics that run counter to the marketing strategy; duplication of effort and; in-fighting around who controls the priorities and budget.

The root causes of loose integration often arise unintentionally.  For example, programs are implemented unevenly; customer and channel fragmentation leads to a plethora of conflicting messages and tactics and; the growth of marketing outsourcing increases the odds of misalignment.  Not to be minimized is the personal dimension where department heads or employees purposely pursue agendas that are not aligned with the marketing strategy.

An almost fully integrated company  (complete integration is probably unrealistic) stands a good chance of delivering superior marketing performance as defined by lower cost and higher levels of customer acquisition and retention, higher levels of innovation and a stronger brand image. Examples of highly ‘integrated’ firms include: Apple, Four Seasons, Nike, Coca-Cola, McDonald’s and Victoria’s Secret.

Leaders can preempt and overcome the harmful effects of low integration by considering three, interrelated, approaches:

1.  Drive strategic congruence across the company

Brand internally

Your employees are market ambassadors as well as influencers within their organizations. Getting them to read and execute off the same marketing script will minimize integration issues.  Some management action items include evangelizing the marketing mission and strategy across the company, regularly communicating the firm’s value proposition and point of difference, and quickly updating stakeholders with any important changes to the program, partners, etc.

Make planning visible

A transparent and inclusive planning process increases integration and alignment by ensuring all views are aired, promoting fact-driven decision making, exposing management bias and reducing organizational uncertainty.

In-source more activities

The more marketing agencies and contractors are used, the greater the chance of integration problems, tracing to complexity-induced errors and strategy-execution gaps. Bringing more work and functions in house (and ensuring they are properly managed) will improve integration.

2.  Break down silos

Revamp the structure

A business maxim says that structure should follow strategy.  Often the structure gets out of sync and needs to be corrected.  Some ways to do this include organizing around capabilities or strategic goals like customer acquisition and retention, and introducing a shared service-delivery model that centralizes program execution.

Rogers Communications uses a couple of different structures to drive integration. “We bring people from across the organization and regardless of reporting relationships on teams to focus around common goals such as retention or acquisition,” says John Boynton, chief marketing officer. “Another approach is around execution. For example, with social media executions we have a hub-and-spoke model with experts in the hub giving advice and assistance to those in the spoke trying to use social media for varying different objectives.”

Clarify roles and responsibilities

Unclear accountability and decision rights naturally lead to conflicting programs and duplication of effort, not to mention internal strife. One way to address this problem is to clarify and formalize roles and responsibilities with charters and circulate them to key stakeholders.

3.  Use one playbook

Fine-tune the management systems & culture

Employees often work at cross-purposes when their goals, metrics and incentives are not aligned.  Leaders need to ensure there is a shared marketing mission, lexicon and performance measurement systems that is congruent with corporate priorities and integrates every activity up and across the organization.

When formal systems are lacking, companies need to be pragmatic. “Our goal is to define and create a marketing culture where it is okay to have discussions at the outset to establish decision makers and inputers,” says Boynton. “This can save a lot of time and avoid disparate executions and decisions.”

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Organize around capabilities not functions

Can a 21st century business excel with a 20th century organizational structure?  Unfortunately for a lot of companies, the answer is no. To cope with today’s challenges, companies need to be agile, adaptive and tech-savvy.  This is extremely difficult when the traditional organizational structure consisting of multiple, siloed functional groups like marketing or finance are incapable of delivering the capabilities needed to drive competitiveness while minimizing risks. Instead, CEOs should consider redesigning their structures around strategic capabilities in order to maximize organizational performance at the lowest cost.

Dysfunctional groups

The functional model has become so ingrained in management philosophies that few question its usefulness. They should.  By their nature, functional groups are specialized, good for a few narrow tasks but challenged to operate in difficult business environments characterized by competing priorities, limited resources or featuring cross-organizational problems like low employee engagement. Anyone who has worked in a large enterprise knows that many functional groups can be divorced from the needs of the customer or business units, rigid in their approach and often lacking in the latest skill sets.

These drawbacks make it tough for functionally driven organizations to develop world-class capabilities and support strategic priorities.  Attempts to address these shortcomings by adding matrix-based teams and shared services usually come up short. Functional groups will often retain their original veto power, limiting the power of collaboration.  Furthermore, using fluid, matrix teams can increase complexity, add confusion and slow down decision-making.  These measures may ultimately fail because they don’t get to the root of the problem: the functional model is no longer relevant for today’s competitive challenges and environment.

Capabilities win

One of our client projects demonstrated that some firms are better off with a new organizational structure, one built around capabilities and not functions.

A manufacturer’s procurement department had significant performance issues that were affecting their competitiveness. In this sector, a well-tuned procurement capability is critical to managing an extensive parts list that feeds into a just-in-time production model.  The department’s narrow cost minimization focus worked initially but then the wheels fell off. The procurement group became siloed,  no longer responsive to the divisions that were trying to become more customer-centric. Moreover, the firm was no longer receiving new innovations from its chastened vendors. Our solution was to create an internal Procurement Centre of Excellence.  We worked with the lines of business and other functional groups to develop a new and unique Procurement structure that could align their activities to corporate strategies, attract new talent and better address all stakeholder needs. The formation of this new capabilities-based group led to improved vendor relations, reduced internal politicking and lower purchasing costs.

Implementing a capabilities-driven structure

The first step is for each company to identify those capabilities, which are needed to outflank competition, and those they just need to ‘keep the lights on’.  For strategic capabilities, the firm would identify which internal and external ingredients are needed to build a world-class capability. Once many of these people, tools and IT assets are assembled, the leadership will want to integrate them into the enterprise through the following steps:

Establish new senior roles. Capabilities-based teams should have C-level sponsors, similar to a Chief Risk Officer or Innovation Officer to ensure accountability, align plans to corporate strategies and to garner the necessary authority and resources.  These unique leaders need to be politically savvy and have cross-functional knowledge so that they can reconcile the disparate needs and assets of various groups.

Create permanent cross-functional teams. Capabilities-based teams should combine multiple skill sets and functional specialists within formal structures (i.e. part of the organizational chart) and with clear mandates and resources.

Tweak the systems. Management and IT systems should always support strategy.  Firms will need to redesign some of the policies and practices to incorporate the new structures.  Some areas to consider include recruiting, performance measurement and budget allocations.

Cultivate generalists. To be successful, these new structures must staff beyond narrow functional skills to include people with strong generalist skills and habits (representing key internal groups) and traits such as problem solving and collaboration.

Measure performance. As these groups are strategic, they need to be measured and managed through charters and metrics that directly link to key corporate goals.

Organizational change is never easy. In the above client example, management had to overcome cultural, reporting and vendor-management challenges.  However, the results are well worth it. Companies that do their homework and move boldly to a capabilities-based organizational structure can reignite corporate performance and competitiveness.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.