Why global companies need to rethink their operating models.
Columbia Business School professor Rita McGrath studies innovation, corporate venturing, and entrepreneurship. Her latest book is Discovery-Driven Growth (2009).
Most companies sabotage their own innovation processes without meaning to. I’ve noticed five tell-tale signs of this syndrome, which I recently described during a talk to the Columbia Media Forum.
1. Innovation is episodic. We’ve all seen this movie: A few people in the organization have a burning desire to foster more innovation, or a different kind of innovation, so they invent a new process. If they are more junior, they might create a small team that, working around the typical organizational barriers, explores new opportunities. If they are more senior, the impulse may become formalized in a skunkworks, or even a New Ventures Division. For a while, things move along: people make interesting discoveries, and find new places where the company’s capabilities might be relevant.
All too often, however, the initiative ends badly. Sometimes it’s because the senior sponsor moves on. Sometimes it’s because the ideas didn’t work out: innovation, after all, is an uncertain process. Sometimes the company faces a cash or a profit squeeze, and the folks with budget scalpels go looking for something to cut. (It’s easy to ax innovation. Potential future customers can’t scream about not getting a product they don’t know they would love.) So, the innovation efforts get shut down.
More tragically, the group has actually come up with something powerful and novel, but — whoa — someone senior realizes that this could have a disruptive or cannibalizing effect on existing cash cows. The innovators get squashed and the idea is shelved.
What to do? First, remember that innovation, like any other important organizational process, can be managed. Don’t reinvent the wheel — there are good resources that can help you build a repeatable process. Second, recognize that on-again, off-again innovation is worse than nothing. It sends the signal that these are not the projects that people should bet their careers on. So, make it continuous and systematic. Set aside a regular budget. Build it into good people’s career paths.
2. Resources are held hostage by incumbent businesses. If you want to understand the most significant lever for generating change in a large, complex organization, you need to understand the resource allocation process. Resources flow where there is power; they signal what is important. Unfortunately, the resource allocation process in most complex organizations is not innovation-friendly. Rather, it’s a throwback to an era when the importance of a business was directly correlated to the people and assets it had under management. Makes perfect sense in a world of steady-state production. It can be lethal to organizations trying to be more innovative.
Most people who manage powerful businesses believe that it’s not in their personal best interest to contemplate shrinking that business or redeploying its assets and capabilities. So resources shore up the position of businesses that are starting to fade, eking out a little more time for the managers in charge. This creates two problems: first, valuable assets are being tied up in a business that doesn’t represent the future. Second, the resources that might be used to fund growth are held hostage.
The only time I’ve seen a company neutralize this problem is when very senior managers are charged with extracting resources from established businesses and re-purposing them to fund growth. This is not easy stuff. IBM had to re-invent its entire innovation process, creating an “Emerging Business Opportunity” model where a senior-level executive watched liked a hawk to be sure that the people and assets allocated to innovation didn’t get sucked back into the existing business. Ivan Seidenberg of Verizon was criticized by many — even his own people — for re-purposing the cash coming out of land-lines and phone books to support moves into wireless and entertainment businesses. The core lesson is that, if you allow the existing businesses to determine where people and funds are allocated, you won’t get innovation. Leer más “Five Ways to Ruin Your Innovation Process”
Centralized Structure: The most common is the centralized structure that more than 50% of recruiting functions follow. Central structures are not only common; they are efficient. A single person controls all recruiters, all budgets, and all resources. Decisions get made quickly. It “looks” efficient and streamlined to those who approach organizations like machines and expect people to act like machines.
Its weakness is that most leaders make decisions with imperfect data, distorted views of events, and often play to what pleases their boss more than to what’s right for the organization. The very best recruiters and many who have strong ideas may become disengaged and leave, depriving the organization of their perspective. It also limits creativity and experimentation as central leadership is about expediency and the here-and-now.
However, it can be an effective structure, especially in a small organization. If your company has only a handful of recruiters and little infrastructure, a central organization does make a lot of sense and would be a logical form. It requires a central leader with a sense of vision and with the capability to set direction.
Decentralized Structure: Completely decentralized structures are much less common and only appropriate in the rarest of circumstances. In a large and highly diversified conglomerate, perhaps a form of decentralization would be an acceptable way to organize. This structure allows each part to have total control over itself. In effect, it is many centralized functions working under the same umbrella. Its strength is the freedom it gives to a recruiter to do his or her job in whatever way desired. But the flip side is that the resources to implement ideas and the commitment to follow through are often missing, making the freedom much less valuable.
In decentralized structures many things don’t get done very well or at all: metrics are not rolled up, recruiters do not receive consistent training, EEO standards are hard to enforce, and it is probably hard to even get the right data. There is no overall strategy and little sense of belonging to a larger organization. While freedom is nice in many ways, this is too much of a good thing.
Matrix Structure: This is a complex structure where individual functional areas are divided to support particular products, product lines, business units, etc. For example, the recruiting department might have a sourcing group where individuals are assigned to particular product groups or business units. There might be teams made up of sourcers, recruiters, HR generalists, and so forth to support the business.
The weakness of a matrix organization structure is lack of clarity as to where loyalty really lies. If an individual is responsive to the business and neglects the functional loyalties, or vice-versa, there can be tension, anger, and loss of financial rewards.
Matrix structures rarely work well, but when they do, leadership makes it very clear where rewards come from and where primary loyalty lies.
Hybrid model: This is also called the federal model because it look a great deal like the way the United States has modeled the relationship of its central government with the individual states. The “states” in our model are the various divisions or branches of your organization, and they have the core responsibility for recruiting. The central function still exists and has its own set of responsibilities and duties. It sets an overall strategy for the recruiting function, develops standards and training so that every recruiter does things in a similar way, funds research, and purchases and maintains a central talent acquisition system or other system for building talent pools.
Organizations who adopt this structure need recruiters who are collaborative and yet can focus on filling the needs of their internal clients. They need creative and flexible managers who can adapt quickly and figure out ways to stay within the guidelines and standards and still get the positions filled. It is a structure filled with give and take — with the need to compromise and share for the greater good. It is a powerful model, but harder to sell than the seemingly more efficient centralized model.
This is also a model that adapts well to global units and to virtual workers. Each can operate the way best suited to their circumstances, but they also agree to abide by the commonly agreed-upon rules, use the same technology, and share their skills and learnings. This structure fits the social network model and provides for focus while allowing the maximum amount of flexibility and freedom.
I have compiled a list of questions that may help you think through how you are organized and whether or not to restructure.
1. Does your current structure help you achieve your recruiting goals or does it impede attaining them by fostering inefficient or poor decision making?
2. Does your current structure play to everyone’s strengths? Do those with the right skills work in the right place and feel comfortable making suggestions and offering ideas?
3. Does this structure allow for cross division/business unit collaboration and sharing?
4. Does each business unit feel that it is being well served by this structure?
5. Does everyone have access to and use the same technology for tracking and reporting?
6. Have you removed all extra layers and reporting relationships that do not add direct value? Is it efficient?
7. Do the hiring managers understand where to go and who to go to for services?
8. Are there clear lines of responsibility and accountability for each aspect of the recruiting function?
9. Are decisions made with minimum bureaucracy?
10. Are critical data and facts funneled to a common core for reporting?
There are no absolute right or wrong answers to what structure is best. There are perhaps three criteria that are core to deciding if you have chosen the best one for your organization. These are:
1. The customer (and who that is can depend) becomes the central measure of success. His satisfaction is the core measure.
2. All data, internal and external, is centrally recorded and available for analysis and incorporation into HRIS and other tools.
3. Needs and resources are flexibly and quickly matched. Resources are allocated to ensure customer satisfaction.
Any structure that helps to achieve the organization’s goals in a way that is respectful of others, encourages creativity and honest feedback, and that accommodates virtual and global workers is a good one.
I see many recruiting functions wavering back and forth between centralized, decentralized, and some hybrid forms of organization. Recently this has been made worse by the increased number of virtual, contract, and part-time recruiters and the global spread of sourcing and social networks.
I usually end up, when talking to recruiting leaders, in the age-old discussion over whether it is best to keep the function centralized or to change to some other form. I think the majority of leaders want a centralized function for a couple of reasons. The first is the desire to be in control without question. It’s about power and prestige, because in the corporate world, the more people who report to you the more assumed power you have. The second is for efficiency because it is true that organizations with one leader can make decisions fast — whether they are good ones or not.
But leaders should ask which structure will be the best one for their particular organization. There should be a clear set of answers to these questions: “What are you trying to achieve?” and “What is your organization’s culture?” Because, in the end, every effective structure is a reflection of strategic intent and of the values and goals of the organization.
Within organizations there are structures are most commonly found, along with their tweaks, modifications, and adaptations. Leer más “How Should You Be Structured? 10 Questions to Ask”