Restructuring is painful and often ineffective, yet organizations keep restructuring every few years. The reason this keeps happening is because moving around boxes on the org chart does not solve the problems it aims to solve. So leaders try again, using another approach or perhaps, reverting to the previous structure. That doesn’t work either, and restructuring is back on the books a few years later. Clearly, there’s a need to look at restructuring from a new angle.
Paula Martin, the founder and chief creative officer of MMI, says the key to breaking this cycle is in leaving the vertical structure stable and looking at the business’s horizontal dimension instead.
Why Go Horizontal?
The key shift leaders need to make is focusing on the organization’s business value chain, or what we call its horizontal dimension.
“Take a look at how you run your business,” Martin says, “the boxes on the org chart don’t matter all that much. You can move them around, centralize or decentralize, but ultimately, things happen where your value chain is – you design your products, you make them, and you distribute them. That’s your horizontal dimension. What happens in that flow of things is what you need to optimize.”
Using an up-to-date organizational operating system will give you ways to make this process work in the most effective way. And you don’t have to change your org chart at all to achieve this. Your marketing team, your finance and accounting units, your HR department can stay where they are. What you need is to create cross-functional governance to drive your value chain. That horizontal process will now take priority over the vertical functions.
What Does Focusing on a Horizontal Dimension Actually Look Like?
Leaders would need to map out the business process throughout the organization and set up cross-functional teams reflecting that process.
Let’s say you have a product design process. Every organizational unit involved in design will have a representative on the team that will serve as a steering or governance body. Each governance team must have a clear purpose. In our design team example, representatives of your marketing, finance and accounting units will serve on that team in some capacity, along with designers, senior and project leaders, and a representative of the production team – the next process in your value chain.
As organizational priorities change and the portfolio of projects evolves, governance teams can be reassigned, added or subtracted. The functional departments remain the same and people remain in the same departments as before, but their specific work focus and activities will depend on what team or teams they are currently on. This gives people a sense of stability, and yet the organization stays agile and able to respond to changes in the business environment.
As most restructuring initiatives are unproductive, expensive and demoralizing, focusing on you horizontal dimension allows organizations to not compromise on productivity and make improvements at a very low cost. Such changes are also the least disruptive to the individuals. Talent within the organization tends to stick around where there’s room for growth and opportunities to work with different people. Thus, prioritizing your horizontal dimension is good for both stability and growth. In fact, you don’t have to choose between the two, because you can improve and change incrementally and as much or as little as you see fit.
It’s Not Easy, Is It?
The key shift leaders have to go through is accepting the new reality of the vertical functions being secondary to the horizontal processes of the business. Secondary doesn’t mean unimportant, but still requires an adjustment for say, a VP of Product Development who is used to being the emperor of his own domain, but now has to work in teams with other leaders to form and drive organizational strategy.
Effective collaboration skills are absolutely key to success in this new reality. As a leader, you no longer strive for your unit to be the “best” in the organization, and your goals are not just your department’s goals. Your thinking needs to shift toward a collaborative environment, where what matters most is your department’s ability to work well with others towards the organization’s strategic goals. You can still achieve impressive results as an individual, and the team you lead can still have a reference point as to how well they are doing, but the work will become much more cross-functional and team-based then many leaders are used to.
What Are the Key Challenges?
The hardest part of that paradigm shift is arguably in decision-making. Leaders used to making decisions within their vertical functions (say, your product development unit) have to adjust to the fact that decisions are now made in the governance team. “What sometimes happens is that leaders think they have cross-functional teams and horizontal governance, but they are such in the name only and the organization is still being run from its vertical dimension,” says Cathy Cassidy, MMI’s Managing Director. “You can always tell that by looking at how they make decisions. If your product development department decides things at their departmental meeting and then hands the instructions over to the governance team expecting no further discussion, that’s vertical governance.”
Even semantics can trip people up. The word “governance”, for one, is often associated with bureaucracy, so leaders are reluctant to get behind initiatives involving “governance.” Another key concept – “collaboration” – has drawn a lot of criticism lately and is seen with a certain amount of skepticism. What’s important here is being able to separate fact from myth. Governance is necessary for any organization and any process as it facilitates work across functions. And collaboration — when well-understood and properly set up — can do wonders for your organization’s productivity, effectiveness, and morale.
What Do You Need to Know?
Just like people, each organization is unique and has certain strengths and weaknesses. In order for leaders to transform the organization without the pains and inefficiencies of a traditional restructuring, they need to know where the organization stands and then develop a change strategy based on the organization’s current status and future goals.
“We call this ‘matrix maturity.’ Before undertaking a change initiative, it’s important for leaders to assess the maturity of their organization as a matrix,” Martin says. Some organizations have committed leadership and strong teams that work well in a collaborative environment, but their structure may still be largely vertical, which leads to silos and loss of productivity. Other organizations may have a more mature matrix structure, with strong governance teams making cross-functional decisions, while their staff and leadership may struggle with collaborative methods and leading without authority.
Understanding where the organization needs to grow and change is the first step to a successful change initiative. For organizations that have already gone through a restructure, the next challenge is in operationalizing the changes and making them work. A good look at maturity will help in this case as well.
